In Nepal, Terai is differentiated into "outer" and "inner" Terai.

Outer Terai begins at the alluvial, generally forested and often marshy zone along the southern edge of the ~700 metre Siwalik Range -- the first and lowest range of Himalayan foothills. In Nepalese usage Terai extends to the border with India and includes drier, mostly cleared agricultural land below the marshes. Indian usage is more tied to hydrology and ecology. In some places the wetter ecoregion extends kilometers south of the Nepal border into India.

Most of the local population is ethnically Indian, natively speaking Awadhi, Bhojpuri and Maithili. They were largely disenfranchised during the Shah and Rana regimes that were largely administered by and for Paharis. This discrimination gave rise to political movements seeking greater representation.

Major towns of the Outer Terai (east to west):

Bhadrapur and Mechinagar in Mechi Zone
Biratnagar Inaruwa and Itahari in Koshi Zone
Lahan and Rajbiraj in Sagarmatha Zone
Janakpur in Janakpur Zone
Birgunj in Narayani Zone
Butwal and Siddharthanagar (Bhairahawa) in Lumbini Zone
Nepalganj in Bheri Zone
Dhangadhi in Seti Zone
Mahendranagar in Mahakali Zone
Inner Terai refers to elongated valleys lying between the Siwalik Range and the 2-3,000 metre Mahabharat Range further north. In India these valleys are called "Duns", e.g. Dehra Dun. Most of these valleys extend east-west or SSE-WNW parallel to enclosing ranges. They are five to ten kilometers wide and up to a hundred kilometers long.

Inner Terai valleys historically were agriculturally productive but extremely malarial. Indigenous Tharu people had a degree of inherited resistance and populated these areas. A malaria eradication campaign opened the Inner Terai to settlers from the "hills" to the north and from neighbouring India, to the detriment of indigenous peoples.

Important towns in the Inner Terai are:

Triyuga in Kamala
Kamalamai in Marin Khola
Bharatpur (Narayangadh), Hetauda, and Tandi in Chitwan
Tulsipur and Tribhuvannagar (Ghorahi) in Dang
Birendranagar in Surkhet.
Wetter, more malarial parts of the Terai were left forested by official decree during the Rana dynasty as a defensive perimeter called Char Kose Jhadi (four kos forest, one kos equalling about three km or two miles).

Mahendra Highway crosses the Nepal Terai from Kakarbhitta on the eastern border in Jhapa District, Mechi Zone to Mahendranagar near the western border in Kanchanpur District, Mahakali Zone. It is the only motor road spanning the country from east to west.