Non–timber forest product (NTFP) use is an integral part of the rural economy of Nepal, but little is known about NTFP collection and marketing dynamics. This study investigated the intensity of NTFP collection, the financial benefits gained through the collection of a representative species, and the contextual factors influencing NTFP collection and sale in 12 villages of the Baitadi district of far western Nepal. Thirty-nine per cent of the economically active population collected a total of 24 NTFPs from 23 species, which contributed 0–90% of the total household income. A marketing chain and financial analysis of Valeriana jatamansi (sugandhwal) revealed that various trading and marketing channels existed from the village to district-level NTFP outlets. The price received by the collector depended on the length of the market chain and the political context of the market. Political instability resulting from the Maoist insurgency reduced profits from sugandhwal sale by 23–25%. The number of NTFP-selling outlets accessed by collectors was the most important variable determining the number of NTFPs collected and the overall contribution of NTFPs to the household. Physical accessibility of the village did not impact the contribution of NTFPs to the household livelihood. The strength of NTFP-related institutions (both government and non-governmental organizations) decreased the total NTFP contribution to livelihoods because at the time of the study the villages were in transition to domestication of NTFPs. In the future, the contribution of domesticated NTFPs to households in villages with strong NTFP-related institutions should be much greater than at present. Increasing access to NTFP-selling outlets may be achieved through information dissemination, empowerment of collectors and establishment of linkages between collectors and traders. In general, domestication is an important strategy to ensure a continuous supply of NTFPs. Middlemen traders are seen as important stabilizers of prices as long as fair trading practices are followed. Monitoring of these villages over time will also provide important new quantitative information on the process of transition in rural villages changing from a forest-collection NTFP procurement strategy to a domestication procurement strategy.