Both issues, poverty reduction and environmental degradation, are considered as the greatest global challenges of twenty-first century. Developing countries, which are the primary sufferers, are formulating and implementing different policies and programmes to address these problems. Most of the developing countries have signed for achieving Millennium Development Goals (MDGs), an ambitious global development agenda, designed by the United Nations in 2000, in national level by 2015. This analyses the progress of Nepal towards MDGs, particularly, poverty reduction and environmental sustainability, and reviews the policies, programmes and activities. The analysis highlights the challenges and opportunities to achieve environment and poverty related to MDGs. The study also identifies how its goals are internalized into other policies and programmes, formulation and their implementation and activities, and what the causal relationships between poverty and environment in rural and urban areas of Nepal are. The analysis also highlights the situation of synergic efforts made by Nepal’s government to address these challenges in cost effective manner.