Dalits, or people of the Untouchable caste of Nepal, have suffered a long history of exploitation and discrimination. Bahunbad, or the caste system culture (also referred to as Brahmanism), originally came from Indian Hinduism, and refers to the community of Hindu priests who institutionalized discrimination and suppression of the lower castes in order to perpetuate their monopoly of mandatory ceremonies. Prior to 500 B.C., Nepal was inhabited only by indigenous ethnic groups, and had no caste system. Around that time, Hindus fought various wars in India, and Hindus started to migrate to Nepal, bringing their caste system with them. These Hindus exploited Nepal's native peoples, seized land, and repressed native languages. They also aggressively promoted the Hindu religion, and many indigenous groups adopted the caste system.
Nepal has 4 major castes – Brahmins (bureaucrats and professionals), Chetris (security forces and professionals), Vaishyas (businesspeople comprised of all native ethnic groups), and Shudras (all Dalit castes, which make up around 25% of the total population). Some native peoples have also created their own caste systems within their groups and have their own Dalit castes. The Nepalese government officially recognizes 28 Dalit castes, but Jagaran Media, an NGO promoting Dalits through the media, has identified around 60 nationwide.

High caste groups are traditionally educated and hold religious and bureaucratic jobs, while Dalits are often illiterate and perform skilled labor, unskilled labor and service jobs. Dalits are blacksmiths, tailors, laborers, shoemakers, artisans, musicians, farmers, entertainers, cleaners, butchers, and prostitutes. Ironically, some Dalits pursue essential and sometimes highly skilled professions. However, at present, educated and urban Dalits are facing a difficult transition time in terms of employment. Educated Dalits are unwilling to accept traditional jobs in rural areas because of the stigma and discrimination they would face there. Most profitable urban jobs, even those traditionally held by Dalits, have been captured by the higher castes. 94% of government jobs are held by Brahmins, and the foreign trade sector is similarly dominated by the high castes. Urban Dalits have a very difficult time breaking into professional jobs, including the business and NGO sectors, so many choose unemployment or join the Maoists.

Discrimination exists on all levels. Most non-Dalits still refuse to eat or drink anything touched by a Dalit. School curriculums do not mention anti-discrimination. High caste youths often refuse to date Untouchables, or share dormitory rooms with them. Urban Dalits have a very difficult time finding apartments, and only a paltry percentage own property. No Untouchables hold influential government positions, and no political party puts Dalits forward as candidates in elections. Last year, a Dalit was tortured by a high caste couple and forced to eat his own feces. Other Untouchables often report being forced to eat unfresh meat and wash their own utensils in restaurants even after they have paid as regular customers.

The economic divide between the urban and rural areas of Nepal is enormous. Rural people still live the same way they have for hundreds of years and maintain traditional attitudes. Dalits living in the countryside suffer from the same injustices their ancestors did centuries before. In the past, Dalits were considered to be intrinsically unclean, and social mobility was almost impossible. Dalit men were forbidden to even look at high caste women, and sexual intercourse between a Dalit male and a Brahmin woman resulted in the Dalit's execution, torture, or dismemberment. On the other hand, intercourse between a Brahmin man and Dalit woman was considered to be a "good opportunity" for the woman to advance, and even now, girls from certain Untouchable castes in Western Nepal are born into prostitution, earning their living by sweeping temples and sleeping with priests and other men. In the 1800s, the Civil Court passed discriminatory laws against Untouchables, forbidding them from receiving education, using public spaces, entering temples or marrying people from other castes. In 1963, King Mahendra abolished these laws, declaring that Nepal as a nation was against the caste system. However, Mahendra's provisions were only legal and nominal, and no practical programs were implemented to empower Dalits or reform cultural attitudes.

In 1991, Nepal ratified the People's Constitution, which was based on the ideals of democracy and equality. The Constitution rejected the caste system, linked Dalit problems with human rights, and guaranteed equal rights to Dalits. The international community also became active in Nepal, addressing Dalit problems as a priority development issue. School attendance rates of Dalits increased, and advocacy began on the civil society, domestic, and international levels. As Dalits became more educated, they started to be social activists on their own behalf.

Dalits and the Maoist Insurgency: Dalits played a major role in the development and continuation of the Maoist conflict. Since 1995, the Maoists have made caste problems one of their major platforms. Maoists appealed to the Untouchables in rural areas, allowing them to enter non-Dalit zones, temples, and public areas, and initiating shared meals and inter-caste marriages. They also appointed Dalits to high positions within their leadership and military hierarchy. Many Untouchables, both educated and illiterate, became staunch supporters of the Maoists and joined their forces, thus helping to fuel the conflict.

Caste issues were pushed to the forefront once again, and the international community pressured the government to resolve the problem in order to restore peace. In 1996, the government formed the Dalit Development Community under the Ministry of Local Development to institute scholarships, and advocacy, networking, and empowerment programs. However, this agency was swayed by party politics, and was not proactive. In 2002, the Dalit Commission was created. Today, the Dalit issue is at least nominally a top priority for the government, the Maoists, political parties, and the foreign aid community.