Prolonged conflict resulted massive internal displacement in Nepal soaring the number of Internally Displaced Persons (IDPs) in Nepal. This study aims to address the impacts of displacement on the livelihoods of IDPs. It analyses the changes in livelihood assets of IDPs due to displacement, factors explaining variations among the IDPs, impacts of livelihood asset change in livelihood outcomes of IDPs displaced in Kathmandu and Dang District. Complete transformation in the livelihoods of IDPs takes place due to positive and negative changes in their access to assets. IDPs with better economic background leading to investment on real estate are relatively less vulnerable than other IDPs. IDPs’ income in the place of origin is one of the major factors explaining variation among IDPs in the place of displacement. Livelihood assets changes among IDPs have different impact on IDP’s satisfaction with livelihood outcomes and their willingness to return which is determined by their livelihood in the place of origin. Distinct difference in needs and preferences of IDPs emphasize the need of different and appropriate initiatives by the government and concerned agencies.