Mountains offer ideal conditions for the development of hydropower, but the uneven distribution of benefits from project development often create friction and development disputes between communities and project developers. How can hydropower projects be designed and implemented in such a way that affected communities derive benefits beyond mere compensation and mitigation? Is there any evidence that benefits can be shared fairly and equitably with mountain communities? These question are particularly important for Nepal, which has an estimated technically and economically feasible hydropower potential of over 40,000 MW, of which only a fraction has been developed so far. The purpose of this report is to document the various facets of benefit-sharing practices in Nepal. In doing so, this report develops a comprehensive typology of the benefit-sharing mechanisms that have evolved in Nepal over the last four decades and critically analyses each of these mechanisms in terms of what works and what doesn’t and what can be done to fine tune these mechanisms to better suit mountain communities?