Abstract Totally modern design of housing in Nepal causes problems both in its use and construction. The modern designs have arbitrary spatial layouts that are incompatible with the cultural needs of the users. They require many foreign building materials and skills making construction problematic. Whereas modern design can improve performance of building in areas of damp-proofing and thermal control, traditional design provides culturally useful spaces. Traditional housing is easy to build but fails in some technical aspects of building. A synthesis of modern and traditional designs is the most suitable approach to housing design in Nepal and governmental policy should facilitate it by redirecting the education on building technology, by encouraging the production of indigenous materials, by suitable regulatory controls and by incorporating an optimal design in its own housing projects.