Since 1950, government-managed irrigation development has been a cornerstone of public policy in Nepal. Numerous case studies, however, have shown that government-managed systems, despite their tremendous advantages in material and engineering resources, are outperformed by the farmer-led, communal irrigation systems -- especially those without modern engineering infrastructure -- which have dominated Nepalese agriculture throughout its history. This report draws on four years of research and analysis on the governance and management of irrigation systems in Nepal to explain why such findings are not a fluke, but are in fact consistent given the incentives facing farmers and irrigation officials. Three opening chapters describe the history of agriculture in Nepal, covering the adaptation of farming and irrigation to Nepal's difficult Himalayan environment, the effect of land taxation and tenure policies on farmers, the evolution of self-governed irrigation systems, and the involvement of the national government in irrigation since 1950. Subsequent chapters analyze the interaction of physical, cultural, and economic factors upon farmers' and governments officials' decisions in greater detail. According to the report, the government's tax and land tenure policies do not provide appropriate economic incentives to farmers. More fundamentally, however, the relatively poor performance of government-managed systems stems from a failure to instill a sense of ownership which inspires greater dedication and cooperation among users in maintaining, operating, and extending systems. Nepal's experience, it is concluded, is highly relevant to other countries which are struggling with similar problems. Includes an extensive bibliography and appendices detailing the study methodology.