Air pollution is known to lead to substantial health burden with the majority of evidence based in North America and Europe. Despite rising pollution, very limited information is available for South Asia. We investigated impacts of particulate matter with aerodynamic diameter ≤10 μm (PM10) on hospitalization by cause and subpopulation in Kathmandu Valley, an understudied and rapidly urbanizing region in Nepal. Individual-level daily inpatient hospitalization data (2004–2007) were collected from each of six major hospitals as Nepal has no central data collection system. Time-stratified case crossover analysis was used with interaction terms for potential effect modifiers (e.g., age, sex, socioeconomic status), with adjustment for day of the week, and weather. Daily PM10 averaged 120 μg/m3 with daily maximum reaching 403 μg/m3. A 10 μg/m3 increase in PM10 was associated with increased risk of hospitalization of 1.00% (95% confidence interval: 0.62, 1.38), 1.70% (0.18, 3.25), and 2.29% (0.18, 4.43) for total, respiratory, and cardiovascular admissions, respectively. We did not find strong evidence of effect modification by age, sex, or socioeconomic status. These results in combination with the high levels of exposure indicate potentially serious human health burden from air pollution in the Valley. This is the first large study of ambient air pollution and health in Nepal.