This paper investigates the relationship between educational policy, equity, and national development in Nepal. It argues that current inequities in educational opportunities and outcomes are largely attributable to persistent inequities and biases in the educational policy framework. We begin by surveying the complex, multifaceted reality of educational disparity in contemporary Nepal and trace these inequalities to exclusionary practices in the policy environment that have persisted in various forms since the inception of an independent Nepali state. We then show how these educational inequities contributed to the civil conflict that engulfed Nepal from 1996 to 2006. Analysis and critique of the most recent policy trends, decentralisation and privatisation, provide insight into the future nexus of educational policy and equity in Nepal. We conclude that it is imperative for policymakers to reconceptualise the relationship between development, education, and equity at this critical juncture. (Contains 2 notes.)