It is nonetheless one of the world's poorest countries, and is struggling to overcome the legacy of a 10-year Maoist insurrection.
Until Nepal became a republic in May 2008, it had been ruled by monarchs or a ruling family for most of its modern history in relative isolation.
A brief experiment with multi-party politics in 1959 ended with King Mahendra suspending parliament and taking sole charge in 1962.
Democratic politics was introduced in 1991 after popular protests, but was marked by frequent changes of government. The last king of Nepal, Gyanendra, twice assumed executive powers - in 2002 and 2005.
Maoist rebels waged a decade-long campaign against the monarchy, leaving more than 12,000 people dead and 100,000 people displaced according to UN figures.
When King Gyanendra's direct rule ended under public pressure in April 2006, the rebels entered talks with the parliamentary government on how to end the civil war.
A peace deal was agreed in November, although the Maoists continued to press for abolition of the monarchy.
Parliament agreed to the condition in December 2007, and the Maoists emerged as the largest parliamentary party after elections in April 2008.
The monarchy was abolished a month later, and a Maoist-dominated government took office in August.
But political instability has plagued Nepal since the end of the civil war. Politicians have yet to agree on a new constitution - a key part of the peace deal with the Maoists - and are at odds over proposals to divide Nepal into states, along ethnic lines.
Nepal has been at odds with neighbouring Bhutan over the repatriation of thousands of Bhutanese refugees of Nepalese descent who fled violence in Bhutan in the early 1990s.
Nepal has a flourishing tourism industry, but faces problems of deforestation and encroachment on animal habitats.
Most of the population depend on agriculture, and the UN estimates that about 40% of Nepalis live in poverty.
Foreign aid is vital to the economy, and Nepal is also heavily dependent on trade with neighbouring India.
News Courtesy: BBC