This paper attempts to analyze the evolution of municipalities in Nepal in terms of historical growth, growth of urban population, distribution of urban size classes and number of municipalities by population sizes by ecological region. Similarly, this paper also analyzed to show challenges, problems and planning situation of municipalities of Nepal. Since the database on market and urban centers is extremely limited the analysis will draw heavily on the market towns studies that have been conducted in the last few years by the Central Department of Geography, Tribhuvan University. On the other hand the census is the other source of comparable secondary data on urban centers in Nepal; it was used for the present study. | Evolution of municipalities in Nepal: Challenges and planning