Gender discrimination and son preference are key demographic features of South Asia and are well documented for India. However, gender bias and sex preference in Nepal have received little attention. 1996 Nepal Demographic and Health Survey data on ever-married women aged 15–49 who did not desire any more children were used to investigate levels of gender bias and sex preference. The level of contraceptive use and the total fertility rate in the absence of sex preference were estimated, and logistic regression was performed to analyze the association between socioeconomic and demographic variables and stopping childbearing after the birth of a son. Commonly used indicators of gender bias, such as sex ratio at birth and sex-specific immunization rates, do not suggest a high level of gender discrimination in Nepal. However, sex preference decreases contraceptive use by 24% and increases the total fertility rate by more than 6%. Women’s contraceptive use, exposure to the media, parity, last birth interval, educational level and religion are linked to stopping childbearing after the birth of a boy, as is the ethnic makeup of the local area. The level of sex preference in Nepal is substantial. Sex preference is an important barrier to the increase of contraceptive use and decline of fertility in the country; its impact will be greater as desired family size declines.