In many developing countries, the livestock sector plays a vital role in the national economy, providing a source of food, income, and employment. With changes in demographical, socio-economic, and environmental status, the livestock sector in the developing world is facing challenges of low productivity and has become both a culprit and a victim of undesirable climate change impacts globally. In this paper, we will review the status of Nepalese livestock production systems and evaluate possible livestock species‐specific strategies to promote a more productive and sustainable livestock sector in the future. In Nepal, the livestock sector is deemed essential to alleviate poverty and improve the nutritional status of the population, as in many other developing countries. However, there is a need for substantial improvements in livestock productivity, in particular improvement of feeding strategies to exploit the genetic potential of livestock. For ruminants, the important issue is to improve nutritional value and hence utilization of existing feedstuffs. Use of, e.g., urea, molasses, and enzymes to improve feed digestibility and implementation of technologies to effectively preserve biomass from forages that are only seasonally available are necessary strategic measures. Identification and use of novel anti‐methanogenic feed ingredients will be crucial to develop a ruminant livestock sector that is not only productive, but also environmentally sustainable. For monogastric animals, the development and use of novel protein feed ingredients, such as insects raised on indigestible (for monogastrics) plant residues, should become part of future feeding strategies in support of a circular bioeconomy and improved productivity, not least in small scale poultry production. Future policies should also include a strong focus on capacity building and development of research infrastructure, and promotion of collaborative activities among research and industry sectors to establish a productive yet sustainable livestock sector in Nepal.