Kathmandu is the capital city of Himalayan country Nepal. It is a bowl shaped small valley with 3.5 Million populations. With approximately 5000 lane- km of roads and about 40% of entire vehicle populations of the country plying here without any grade separation, it has become quite challenging to manage the smooth flow of traffic in the city. The population of motor bikes is 75% making the job of traffic management difficult. Lack of foot path and bi cycle lanes for pedestrians and NMT and the narrow streets with manually controlled traffic intersections further complicate the deteriorating traffic flow. The improvement efforts including widening of critical roads could produce short term results only. A project named Kathmandu valley Sustainable Urban Transport Project, KSUTP funded by ADB could not progress as desired. This paper discusses the problems, studies and measures being undertaken to resolve these issues.