‘Ecosystem Services’, defined as “the benefits people obtain from ecosystems” is an evolving concept that connects ecosystem with human wellbeing through provisioned services. Safeguarding ecosystems is one of the Aichi Targets (Target 14) for biodiversity conservation under the Convention on Biological Diversity. These services can be categorized as supporting services that uphold living conditions, such as soil formation and nutrient cycling; provisioning services that contribute to livelihoods and the economy, such as food and water; regulating services that aid regulation of ecosystem processes, such as regulation of floods, drought, land degradation, disease, etc.; cultural services that provide nonmaterial benefits, such as recreation, religious, or spiritual and historical sites. Since ecosystem services are not sufficiently understood and prized (in pecuniary terms), they are unappreciated and do not register with many policy makers. On the other hand, the demand for ecosystem goods and services is growing due to an increasing human population and globalization. When beneficiaries are obsessed with short-term economic growth and are less concerned with nature, mainstream decision making is less inclined to incorporate ecosystem services in conservation. Resource users will not respond to the degradation of ecosystem services in their resource management decisions until and unless these services are assessed and their values recognized. <p> <p> The diverse ecosystems found in Nepal are the major sources of ecosystem services supporting more than 70% of the rural communities directly. The low-income economy is highly dependent on ecosystem services and other natural capital, including tourism. It is estimated that the total contribution of environment-related income to the country’s economy may be over 50%. Agriculture, combined with forestry and fisheries, accounts for more than 38% of the country’s GDP. About 80 to 90% of the population is dependent on forests and subsistence agriculture for their rural livelihoods. Significant portions of the power, water, manufacturing, trade, and tourism sectors are also dependent on the environment in one form or another. It is estimated that the forestry sector alone contributes 15% to the GDP of the country. Similarly, non-timber forest products contribute about 5% of GDP. Tourism, much of which is nature-based, provides about 2% of the total GDP and about 25% of the total foreign exchange earnings. Therefore, the wise management of ecosystems and natural resources can be a key to sustainable economic development and poverty alleviation strategies in Nepal. <p> <p> There is an urgent need to comprehend the complexities of the ecosystems and the bio-socio-economics related to its management so that appropriate policies and strategies can be developed to address emerging threats to ecosystems and to enhance services to benefit both nature and humans alike. The Support to Rural Livelihoods and Climate Change Adaptation in the Himalaya (Himalica) initiative is aimed at supporting poor and vulnerable mountain communities in the HKH to mitigate and adapt to climate change impacts through collaborative action research and pilot activities. The objective is to help build the capacity of institutions working on resilience to climate-induced vulnerability, which will subsequently improve the livelihoods of the mountain communities in the HKH. However, it is assumed that adaptive capacity can only be attained when the value of the ecosystem services provided by mountain communities to themselves and those downstream is understood, recognized, and maintained. Thus, ICIMOD in collaboration with BCN and with financial support from European Union conducted an assessment of the ecosystem services in Rauta VDC, Udayapur District, Nepal.<p> <p> The report highlights integrated ideas and scenarios of the state and dynamics of ecological, socioeconomic, and livelihood aspects of the study area. It also summarizes people’s perceptions on climate change scenarios and potential impacts on biodiversity, ecosystem services, and their livelihoods. It highlights the overuse of resources, with an emphasis on land use and land cover change, and discusses the factors affecting people’s vulnerability, including adaptive capacity, livelihood options, and adaptation practices adopted by local communities in response to environmental and socioeconomic changes. Finally, the report develops knowledge products to share and ensure mainstreaming for the effective planning and management of ecosystems.