Among the earliest inhabitants were the Newars of the Kathmandu Valley and aboriginal Tharus in the southern Terai region. The ancestors of the Brahman and Chetri caste groups came from India, while other ethnic groups trace their origins to central Asia and Tibet, including the Gurungs and Magars in the west, Rais and Limbus in the east, and Sherpas and Bhotias in the north.

In the Terai, a part of the Ganges Basin with 20% of Nepalís land, much of the population is physically and culturally similar to the Indo-Aryan people of northern India. People of Indo-Aryan and Mongoloid stock live in the hill region. The mountainous highlands are sparsely populated. The Kathmandu Valley, in the middle hill region, constitutes a small fraction of the nation's area but is the most densely populated, with almost 7.4% of the population.

Religion is important in Nepal--The Kathmandu Valley alone has more than 2,700 religious shrines. Nepal is about 81% Hindu. The constitution describes the country as a "Hindu Kingdom," although it does not establish Hinduism as the state religion. Buddhists account for about 11% of the population. Buddhist and Hindu shrines and festivals are respected and celebrated by all. Nepal also has small Muslim and Christian minorities. Certain animistic practices of old indigenous religions survive.

Nepali is the official language, although a dozen different languages and about 30 major dialects are spoken throughout the country. Derived from Sanskrit, Nepali is related to the Indian language, Hindi, and is spoken by about 90% of the population. Many Nepalese in government and business also speak English.