Using data from the survey of the Ministry of Education, Nepal-2005 for school leaving certificate (SLC) exam, this paper attempts to estimate the impact of private school competition on public school performance for the case of Nepal. The study uses the number of private schools in the neighborhood as a measure of competition. The identification problem is that private school enrollment is likely to be correlated with public school performance. To address this, the study uses the existence of a motorable road within an hour's walking distance from the sample school as an instrument for number of private schools in the neighborhood. The OLS results show no significant relationship. In contrast, the IV method indicates a positive and significant impact of private school competition on public school performance, which holds true for the continuous and binary measure of private school competition. (Contains 4 tables.)