diff --git a/erpnext/config/projects.py b/erpnext/config/projects.py
index 1a70aee..a8514b2 100644
--- a/erpnext/config/projects.py
+++ b/erpnext/config/projects.py
@@ -18,6 +18,11 @@
 					"description": _("Project activity / task."),
 				},
 				{
+					"type": "doctype",
+					"name": "Project Type",
+					"description": _("Define Project type."),
+				},
+				{
 					"type": "report",
 					"route": "List/Task/Gantt",
 					"doctype": "Task",
diff --git a/erpnext/patches.txt b/erpnext/patches.txt
index 00f395f..2aabfc6 100644
--- a/erpnext/patches.txt
+++ b/erpnext/patches.txt
@@ -426,3 +426,4 @@
 erpnext.patches.v8_1.set_delivery_date_in_so_item
 erpnext.patches.v8_5.fix_tax_breakup_for_non_invoice_docs
 erpnext.patches.v8_5.remove_quotations_route_in_sidebar
+erpnext.patches.v8_5.update_existing_data_in_project_type
diff --git a/erpnext/patches/v8_5/update_existing_data_in_project_type.py b/erpnext/patches/v8_5/update_existing_data_in_project_type.py
new file mode 100644
index 0000000..497da06
--- /dev/null
+++ b/erpnext/patches/v8_5/update_existing_data_in_project_type.py
@@ -0,0 +1,19 @@
+# Copyright (c) 2017, Frappe and Contributors
+# License: GNU General Public License v3. See license.txt
+
+from __future__ import unicode_literals
+import frappe
+
+def execute():
+	frappe.reload_doc("projects", "doctype", "project_type")
+	frappe.reload_doc("projects", "doctype", "project")
+
+	project_types = ["Internal", "External", "Other"]
+
+	for project_type in project_types:
+		if not frappe.db.exists("Project Type", project_type):
+			p_type = frappe.get_doc({
+				"doctype": "Project Type",
+				"project_type": project_type
+			})
+			p_type.insert()
\ No newline at end of file
diff --git a/erpnext/projects/doctype/project/project.json b/erpnext/projects/doctype/project/project.json
index 28eb730..101e4ff 100644
--- a/erpnext/projects/doctype/project/project.json
+++ b/erpnext/projects/doctype/project/project.json
@@ -84,7 +84,7 @@
    "collapsible": 0, 
    "columns": 0, 
    "fieldname": "project_type", 
-   "fieldtype": "Select", 
+   "fieldtype": "Link", 
    "hidden": 0, 
    "ignore_user_permissions": 0, 
    "ignore_xss_filter": 0, 
@@ -97,7 +97,7 @@
    "no_copy": 0, 
    "oldfieldname": "project_type", 
    "oldfieldtype": "Data", 
-   "options": "Internal\nExternal\nOther", 
+   "options": "Project Type", 
    "permlevel": 0, 
    "print_hide": 0, 
    "print_hide_if_no_value": 0, 
@@ -1255,7 +1255,7 @@
  "issingle": 0, 
  "istable": 0, 
  "max_attachments": 4, 
- "modified": "2017-07-19 14:36:20.857673", 
+ "modified": "2017-07-26 14:36:20.857673", 
  "modified_by": "Administrator", 
  "module": "Projects", 
  "name": "Project", 
diff --git a/erpnext/projects/doctype/project_type/__init__.py b/erpnext/projects/doctype/project_type/__init__.py
new file mode 100644
index 0000000..e69de29
--- /dev/null
+++ b/erpnext/projects/doctype/project_type/__init__.py
diff --git a/erpnext/projects/doctype/project_type/project_type.js b/erpnext/projects/doctype/project_type/project_type.js
new file mode 100644
index 0000000..a1f941f
--- /dev/null
+++ b/erpnext/projects/doctype/project_type/project_type.js
@@ -0,0 +1,6 @@
+// Copyright (c) 2017, Frappe Technologies Pvt. Ltd. and contributors
+// For license information, please see license.txt
+
+frappe.ui.form.on('Project Type', {
+
+});
\ No newline at end of file
diff --git a/erpnext/projects/doctype/project_type/project_type.json b/erpnext/projects/doctype/project_type/project_type.json
new file mode 100644
index 0000000..b9a5b54
--- /dev/null
+++ b/erpnext/projects/doctype/project_type/project_type.json
@@ -0,0 +1,163 @@
+{
+ "allow_copy": 0, 
+ "allow_guest_to_view": 0, 
+ "allow_import": 0, 
+ "allow_rename": 1, 
+ "autoname": "field:project_type", 
+ "beta": 0, 
+ "creation": "2017-07-18 13:32:46.031115", 
+ "custom": 0, 
+ "docstatus": 0, 
+ "doctype": "DocType", 
+ "document_type": "", 
+ "editable_grid": 1, 
+ "engine": "InnoDB", 
+ "fields": [
+  {
+   "allow_bulk_edit": 0, 
+   "allow_on_submit": 0, 
+   "bold": 0, 
+   "collapsible": 0, 
+   "columns": 0, 
+   "fieldname": "project_type", 
+   "fieldtype": "Data", 
+   "hidden": 0, 
+   "ignore_user_permissions": 0, 
+   "ignore_xss_filter": 0, 
+   "in_filter": 0, 
+   "in_global_search": 0, 
+   "in_list_view": 1, 
+   "in_standard_filter": 0, 
+   "label": "Project Type", 
+   "length": 0, 
+   "no_copy": 0, 
+   "permlevel": 0, 
+   "precision": "", 
+   "print_hide": 0, 
+   "print_hide_if_no_value": 0, 
+   "read_only": 0, 
+   "remember_last_selected_value": 0, 
+   "report_hide": 0, 
+   "reqd": 1, 
+   "search_index": 0, 
+   "set_only_once": 0, 
+   "unique": 0
+  }, 
+  {
+   "allow_bulk_edit": 0, 
+   "allow_on_submit": 0, 
+   "bold": 0, 
+   "collapsible": 0, 
+   "columns": 0, 
+   "fieldname": "description", 
+   "fieldtype": "Text", 
+   "hidden": 0, 
+   "ignore_user_permissions": 0, 
+   "ignore_xss_filter": 0, 
+   "in_filter": 0, 
+   "in_global_search": 0, 
+   "in_list_view": 0, 
+   "in_standard_filter": 0, 
+   "label": "Description", 
+   "length": 0, 
+   "no_copy": 0, 
+   "permlevel": 0, 
+   "precision": "", 
+   "print_hide": 0, 
+   "print_hide_if_no_value": 0, 
+   "read_only": 0, 
+   "remember_last_selected_value": 0, 
+   "report_hide": 0, 
+   "reqd": 0, 
+   "search_index": 0, 
+   "set_only_once": 0, 
+   "unique": 0
+  }
+ ], 
+ "has_web_view": 0, 
+ "hide_heading": 0, 
+ "hide_toolbar": 0, 
+ "idx": 0, 
+ "image_view": 0, 
+ "in_create": 0, 
+ "is_submittable": 0, 
+ "issingle": 0, 
+ "istable": 0, 
+ "max_attachments": 0, 
+ "modified": "2017-07-26 17:19:30.126346", 
+ "modified_by": "Administrator", 
+ "module": "Projects", 
+ "name": "Project Type", 
+ "name_case": "", 
+ "owner": "Administrator", 
+ "permissions": [
+  {
+   "amend": 0, 
+   "apply_user_permissions": 0, 
+   "cancel": 0, 
+   "create": 1, 
+   "delete": 1, 
+   "email": 1, 
+   "export": 1, 
+   "if_owner": 0, 
+   "import": 0, 
+   "permlevel": 0, 
+   "print": 1, 
+   "read": 1, 
+   "report": 1, 
+   "role": "System Manager", 
+   "set_user_permissions": 0, 
+   "share": 1, 
+   "submit": 0, 
+   "write": 1
+  }, 
+  {
+   "amend": 0, 
+   "apply_user_permissions": 0, 
+   "cancel": 0, 
+   "create": 1, 
+   "delete": 1, 
+   "email": 1, 
+   "export": 1, 
+   "if_owner": 0, 
+   "import": 0, 
+   "permlevel": 0, 
+   "print": 1, 
+   "read": 1, 
+   "report": 1, 
+   "role": "Projects Manager", 
+   "set_user_permissions": 0, 
+   "share": 1, 
+   "submit": 0, 
+   "write": 1
+  }, 
+  {
+   "amend": 0, 
+   "apply_user_permissions": 0, 
+   "cancel": 0, 
+   "create": 0, 
+   "delete": 0, 
+   "email": 1, 
+   "export": 1, 
+   "if_owner": 0, 
+   "import": 0, 
+   "permlevel": 0, 
+   "print": 1, 
+   "read": 1, 
+   "report": 1, 
+   "role": "Projects User", 
+   "set_user_permissions": 0, 
+   "share": 1, 
+   "submit": 0, 
+   "write": 0
+  }
+ ], 
+ "quick_entry": 1, 
+ "read_only": 0, 
+ "read_only_onload": 0, 
+ "show_name_in_global_search": 0, 
+ "sort_field": "modified", 
+ "sort_order": "DESC", 
+ "track_changes": 1, 
+ "track_seen": 0
+}
\ No newline at end of file
diff --git a/erpnext/projects/doctype/project_type/project_type.py b/erpnext/projects/doctype/project_type/project_type.py
new file mode 100644
index 0000000..f46876e
--- /dev/null
+++ b/erpnext/projects/doctype/project_type/project_type.py
@@ -0,0 +1,13 @@
+# -*- coding: utf-8 -*-
+# Copyright (c) 2017, Frappe Technologies Pvt. Ltd. and contributors
+# For license information, please see license.txt
+
+from __future__ import unicode_literals
+from frappe.model.document import Document
+import frappe
+from frappe import _
+
+class ProjectType(Document):
+	def on_trash(self):
+		if self.name == "External":
+			frappe.throw(_("You cannot delete Project Type 'External'"))
\ No newline at end of file
diff --git a/erpnext/projects/doctype/project_type/test_project_type.js b/erpnext/projects/doctype/project_type/test_project_type.js
new file mode 100644
index 0000000..c2198c4
--- /dev/null
+++ b/erpnext/projects/doctype/project_type/test_project_type.js
@@ -0,0 +1,23 @@
+/* eslint-disable */
+// rename this file from _test_[name] to test_[name] to activate
+// and remove above this line
+
+QUnit.test("test: Project Type", function (assert) {
+	let done = assert.async();
+
+	// number of asserts
+	assert.expect(1);
+
+	frappe.run_serially('Project Type', [
+		// insert a new Project Type
+		() => frappe.tests.make([
+			// values to be set
+			{key: 'value'}
+		]),
+		() => {
+			assert.equal(cur_frm.doc.key, 'value');
+		},
+		() => done()
+	]);
+
+});
diff --git a/erpnext/projects/doctype/project_type/test_project_type.py b/erpnext/projects/doctype/project_type/test_project_type.py
new file mode 100644
index 0000000..ee23390
--- /dev/null
+++ b/erpnext/projects/doctype/project_type/test_project_type.py
@@ -0,0 +1,9 @@
+# -*- coding: utf-8 -*-
+# Copyright (c) 2017, Frappe Technologies Pvt. Ltd. and Contributors
+# See license.txt
+from __future__ import unicode_literals
+
+import unittest
+
+class TestProjectType(unittest.TestCase):
+	pass
diff --git a/erpnext/setup/setup_wizard/install_fixtures.py b/erpnext/setup/setup_wizard/install_fixtures.py
index 1301d33..f139d92 100644
--- a/erpnext/setup/setup_wizard/install_fixtures.py
+++ b/erpnext/setup/setup_wizard/install_fixtures.py
@@ -185,6 +185,10 @@
 		{'doctype': "Party Type", "party_type": "Supplier"},
 		{'doctype': "Party Type", "party_type": "Employee"},
 
+		{'doctype': "Project Type", "project_type": "Internal"},
+		{'doctype': "Project Type", "project_type": "External"},
+		{'doctype': "Project Type", "project_type": "Other"},
+
 		{"doctype": "Offer Term", "offer_term": _("Date of Joining")},
 		{"doctype": "Offer Term", "offer_term": _("Annual Salary")},
 		{"doctype": "Offer Term", "offer_term": _("Probationary Period")},