Worldwide, the demand for energy has increased significantly in last two decades, leading to an increased use of non-renewable energy resources. The global agenda aims to reduce the carbon intensity of energy in long-term climate change mitigation strategies, and to achieve Sustainable Development Goal 7 (SDG-7) on affordable and clean energy. Use of renewable energy (RE) can contribute to reducing global greenhouse gas (GHG) emissions while providing incremental financial resources to stimulate clean development mechanisms. Hydropower continues to be the leading RE option and has the additional benefits of water storage for agriculture and other uses. Drawing on the position of four Hindu Kush Himalayan (HKH) countries – Bangladesh, India, Nepal and Pakistan – this paper investigates the current status of hydropower generation and related policies, and attempts to identify the key challenges to and opportunities for hydropower development in the region. Collectively, four HKH countries have commercially feasible hydropower potential of nearly 190 GW. However, only one-third of this potential has actually been tapped so far. Nepal and Pakistan have tapped 2% and 12%, respectively, of their hydropower potential. The current hydropower supply has not been able to fulfill the electricity demand in the region, where 26–37% of the rural population is living without access to electricity, and future demand for electricity is likely to increase sharply. There are several economic, social, technical, environmental, ecological and political challenges to hydropower production in the HKH countries. Despite these challenges, hydropower remains an important option for achieving renewable energy goals in the region. To achieve these goals, we suggest capitalizing on emerging opportunities such as large hydropower development using a ‘smart approach', micro-hydropower promotion, energy trade, and regional cooperation for collective energy development programs.