Inadequacy and poor quality of water supply for domestic purposes is increasingly becoming a concern in rural catchments of the Middle Mountains of Nepal. Water quantity is an issue in pocket areas of these catchments, while water quality is subject to concern in most of the water sources. Microbiological contamination in particular poses a risk to human health. In addition, sediment pollution during the monsoon season is perceived as an issue by the local residents. Elevated phosphate and nitrate levels in many water sources indicate intensive interaction with surface water hailing from agricultural areas and human settlements. These water quantity and quality concerns in two watersheds of Nepal, the Jhikhu Khola and the Yarsha Khola watersheds, are not isolated cases. Similar problems are reported from other watersheds monitored under the People and Resource Dynamics in Mountain Watersheds of the Hindu Kush-Himalayas (PARDYP) project in China, India, and Pakistan and the literature of this region.