Nepal has undergone enormous economic and political changes during the past two decades.Data suggest large and increasing economic inequality after the mid 1990s with income from house rental, employment, businesses, and remittances as well as the stock of wealth in real estate and businesses constituting the leading sources. Considerable disparities existed by castes/ethnicities and spatial distinctions. While the existing socio-political mechanisms greatly shape economic outcomes, inequality has also affected political processes and policy outcomes, exacerbating the gulf between those with and without access to power. These inequalitydynamics have important implications for political stability and democracy in the country.