In the Kathmandu Valley, around 70% of the households dispose their excreta directly into the sewer line while remaining 30% of the households still depend on onsite systems such as pit latrines and septic tanks. Onsite sanitation systems are prevalent mostly in the peri-urban areas of the Kathmandu Valley. The study shows that 30% of households in urban areas of Lalitpur, 8% in Bhaktapur and 18% in Kathmandu Districts still use septic tanks for disposal of excreta while in the peri-urban areas more than 50% of the households use such onsite systems. Even though there are service providers for feacal sludge collection, due to absence of a proper faecal sludge management (FSM) system almost all the collected sludge is discharged into rivers. Thus, there is an urgent need for a proper FSM system in the Kathmandu Valley. Such system could be operated through a public private partnership approach under a responsible institution/authority. By establishing the FSM system in Kathmandu it will be a good demonstration for other urban or peri-urban areas and emerging towns in the country facing similar sanitation problems. This is a joint publication of UN-HABITAT and High Powered Committee for Integrated Development of Bagmati Civilisation which highlights issues on FSM system in the Kathmandu Valley with recommendation and strategies for its improvement