Tourism is one of the major sources of income in Pokhara valley. Phewa Lake and the catchments of the lake in western Nepal provide different ecosystem services. The lake provides irrigation for farmlands downstream, supports fish farming, and is a popular religious and recreational site for domestic and international tourists. Despite the high importance of the lake, not enough attention is paid to its protection. The size and water holding capacity of the lake is decreasing in an alarming rate due to heavy sedimentation from the upper catchments. This book aims to explore opportunities and challenges of payment for ecosystem services (Sediment retention PES Scheme) in Phewa watershed, identifying the tradable ecosystem services, services supplier and beneficiaries of current PES. Moreover, it also identified key stakeholders, their role and financial mechanism of the sediment retention PES scheme. The study was based on secondary sources, consultation with stakeholders, field observation, key informant survey, questionnaire survey. Findings show that among the different ecosystem services Tourism is ranked as 1st and sediment retention was being traded in Phewa watershed.