Local organizations are uniquely positioned to conduct and implement the integrated watershed management programme and activities in Nepal. As key actors of development in the local level, they have enough capacity to carry on the development projects as sustainable way. In this regard, the overall objective of this study was to assess the role of local organizations and their capabilities in watershed development and management. Based on objectives, it is trying to assess their structural characteristics, functional mechanisms, capability and perception of the people on their activities and performance. The study is fully based on institutional analysis of local organizations based on primary and secondary information sources. Both quantitative and qualitative information sources were used during analysis. As twenty six different groups formed by different development agencies such LDFB/VDC/DDC, DFO, WDO, DSCO/RCIW, DHO/DACAW, DADO, DLO and DWCCs and forty four key informants from eight broad local organizations were chosen as respondents from three VDCs Katari, Limpatar and Triveni.