At the close of the 20th Century, there is growing awareness in every society that time is running out for the world's ecosystems, which support humans and all other life on this planet. These systems are being degraded and destroyed at an alarming rate by human development activities such as over-consumption of resources in industrialized societies and over-population in many developing societies such as Nepal. Alternative development approaches must replace the current dominant paradigm, however, most countries appear bent on pursuing strategies of economic growth that are neither socially equitable nor environmentally sustainable. In the current free-market system of global trade, subsistence agrarian communities are being forced increasingly to compete with unaccountable trans-national agro-industry, whose unsustainable, profit-driven interests are foisted upon poor farmers via bilateral and multilateral policy directives. In the case of Nepal, the government (HMG) has failed to implement its own policies which, ostensibly, are intended to decentralize power to local authorities and promote development while also protecting Nepal's fragile environment. Foreign intervention in the form of development assistance has also failed to effect the necessary changes required for sustainable development of the country. Traditional, top-down, or blueprint development approaches have, instead, served to reinforce the power of the center as well as the disempowerment of those on the periphery of Nepali society. This research attempts to present the salient issues of the inter-connected topics of decentralization, environmental management, and sustainable development in the context of Nepal. The main goal is to explore ways to help to tip the balance of power in favor of local authorities, grassroots organizations, and ordinary Nepalese themselves. The research methodology comprises field interviews, literature review, a case study of the Nepal Resource Management Project, and review of institutional, legislative, and planning frameworks which currently exist in Nepal. Both Nepali and foreign works were used, though there is emphasis on Nepal-specific sources.