ABSTRACT In this study, we undertake a choice experiment in order to identify differences in local demand for watershed services in the Koshi basin of Nepal. We first examine the possibility of using a non-monetary numéraire to estimate household willingness-to-pay for watershed services. Survey results indicate that while some 50% of the population is willing to pay in monetary terms for environmental services, this number increases to 72% when asked to contribute in labor time. Social benefits from environmental services are 1.4 to 2.2 times higher in labor hours relative to benefits estimated in monetary terms. Our findings suggest that cash constrained rural households in developing countries are more likely to express their demand for local environmental services by offering their time, rather than making a monetary payment. Our results also suggest that locational differences matter. Downstream community members, who practice commercial vegetable farming, have a higher demand for watershed services and are willing to pay a third more than upstream farmers for these services.