This study examines the association between air pollution exposure and health using a representative survey sample from Siddharthanagar municipality of Nepal. Our data on household characteristics, spatial locations and individual lung function allow us to understand heterogeneity in exposure and respiratory health. We examine exposure differential through three potential mechanisms – occupation, residence and exposure avoidance. We employ a simultaneous equations model to account for the endogenous choice of avoidance and spatial error models to control for the spatial spillover of health outcomes. We find that outdoor workers and those residing near brick kilns have lower lung function. Exposure avoidance positively correlates with lung function. Exposure avoidance, however, is low among marginalized outdoor workers and individuals residing in polluted areas, further exacerbating the exposure gap among socioeconomic subgroups. The study advances the case of environmental inequity through the ‘triple jeopardy’ of low socioeconomic status, exposure differences and poor health.