The Kingdom of Nepal is situated in the heart of Asia, between its two big neighbours China and India. Nepal is home to several ethnic groups. The majority of the 23 million population reside in the countryside. Although figures on many of the health and socio-economic indicators are non-existing, some existing ones show gradual improvement over the years. However the figures for illiteracy and infant mortality are still one of the highest in the world. As per GDP, and population living below the poverty line and per capita income, Nepal still remains one of the poorest countries in the world. Despite this, it provides shelter to thousands of Bhutanese refugees in its land. Frequent natural disasters and recent violent conflicts in Nepal have further added hardship to life. Less than 3% of the national budget is allocated to the health sector. Mental health receives insignificant attention. The Government spends about 1% of the health budget on mental health. There is no mental health act and the National Mental Health Policy formulated in 1997 is yet to be fully operational. Mental ill health is not much talked about because of the stigma attached. The roles of the legal and insurance systems are almost negligible. The financial burden rests upon the family. The traditional/religious healing methods still remain actively practiced, specifically in the field of mental health. The service, comprising little more than two-dozen psychiatrists along with a few psychiatric nurses and clinical psychologists (mainly practicing in modern health care facilities) has started showing its impact--however this is limited to specific urban areas. The majority of the modern health care facilities across the country are devoid of a mental health facility. The main contextual challenges for mental health in Nepal are the provision of adequate manpower, spreading the services across the country, increasing public awareness and formulating and implementing an adequate policy.