This chapter focuses on the type and nature of the urban informal sector and its nature and pattern in Nepal. Labour legislations and social protection do play an important role in protecting the urban informal sector. Poverty in urban areas is less than in rural areas in Nepal. Poverty is one of the key issues in the development process of the least developed and developing societies. The issue is how to integrate poor people into the mainstream of development to help them overcome poverty. The earnings, whether they are from farm, industrial activities, business, trade, transport or communication sectors, signify the level and pattern of employment and its contribution to the social development aspect. Nepal has adopted the decentralisation policy to make governance more reliable, accessible to the commoners, participatory and supported by the local resource base, identified and mobilised by the local people based on their local requirements.