Water and poverty interface is strongly interconnected and a robust assessment of water stress is crucial to identify needy areas and develop appropriate intervention for poverty reduction. Water Poverty Index (WPI) provides an interdisciplinary tool to assess water stress by linking physical estimates of water availability with socio-economic drivers of poverty. This study presents an application of Water Poverty Index (WPI) to estimate and compare the level of water stress in 27 districts of Koshi River Basin in Nepal. Based on data availability, relevance to the study area and review of literatures, 12 indicators were selected under five key components outlined by WPI. The study result shows medium-low degree (WPI = 54.4) of water poverty in the Koshi River Basin in Nepal. The WPI score varies widely (from 49.75 to 69.29) along the districts and it was found that districts in Tarai regions and urban areas were more water stressed compared to the districts in mid-hill and high-hill regions. Priorities for intervention must be given to the districts in Tarai regions and urban areas with a low WPI score, explicitly on the sector regarding access to water and sanitation to address water poverty in the basin.