This article details an application of Water Poverty Index (WPI) to evaluate state of water resources in the context of Nepalese river basins with a case study of Kali Gandaki River Basin (KGRB) located in western Nepal. Considering that water poverty issues and indicators to represent them are location-specific, selecting suitable indicators with due care of local context and data availability is essential to apply the WPI, a holistic tool for water resources planning and management. In this study, it suggests and describes a set of ten WPI indicators and twelve variables suitable in the Nepalese context. The selected set of indicators and variables is used to discuss water poverty situation in the study basin as a whole, spatial variation within the basin and variation at different spatial scales in the basin, that is, basin, sub-unit of the basin (district) and sub-unit of the district (Village Development Committee (VDC)). The study result shows that WPI varies widely (from 37.1 to 56.5) within the study basin suggesting the need of location-specific policy interventions. At different spatial scales, there is no clear trend; however, analysis of the WPI components shows higher resources and access at basin level; higher use, environment and capacity at sub-sub-unit of the basin level. Such variations suggest the need of scale-specific policy interventions and management plans to improve overall water poverty situation in the study basin. Overall, the WPI helped to examine the water poverty situation and recommend priority areas of policy interventions for the improvement of water-poverty situation in the basin.