This was a study of the prevalence of working children and the prevalence and nature of child labor in the production process of the export-oriented handmade carpet industry in Nepal in 2008-2009. The study included wool-processing activities (supplying the yarn) as well as carpet production and finishing. The methodology included preliminary qualitative research, development of a national sampling frame, and a large-scale cross-sectional sample survey of factory-based and household-based production. The survey estimated that 714 factories and 15,847 households were engaged in Nepal’s carpet industry, employing a total workforce of 49,539 usual workers, of whom 10,907 were children. The estimated number of working children was smaller than estimates by previous studies, but the estimated prevalence in the total industry workforce was comparable. Most (80.2 percent) of the children working in the carpet industry in Nepal were working in households. Almost all children working in households (93.9 percent) were living with their parents, and more than four-fifths (86.8 percent) were girls. Factory-based children were mostly migrants (95.7%) from neighboring districts. Most (85.2 percent) were not living with their parents, and a majority (58.7 percent) were girls. Nepal’s child labor legislation identified the carpet industry as a risky (hazardous) activity, and the legislation prohibited employing children in risky activities. Therefore, all children working in the carpet industry in Nepal were in child labor because the work was hazardous. In addition, the data showed indications that half (51.9 percent) of the children worked excessive hours, a proportion that rose to 89.4 percent among factory-based child carpet workers. The study showed clear indications of forced or bonded labor, as well as indications of child trafficking among factory-based child carpet workers. A conservative estimate was that at least 7.8 percent of the factory-based child carpet workers showed indications of trafficking. There were no indications of forced or bonded labor or child trafficking among HH-based children. An important difference between international standards and Nepalese standards is the age of a child. International standards define a child as a person under 18 years of age. Those standards are the basis for this study, which considered all carpet workers under the age of 18 (an estimated 10,907 children) to be child carpet workers. Nepal’s child labor legislation defines a child as a person under 16 years of age, so Nepalese child labor legislation does not protect persons 16-17 years old. The minimum legal age to work in hazardous work by Nepalese standards is 16 years of age. More than two-thirds (70.6 percent) of the children (under 18 years of age) working in the industry were below 16 and, therefore, were working in breach of Nepali law. 9