Processes of urbanisation create peri-urban spaces that are socially and institutionally fluid. In this article, we analyse how contestations and competition over declining water resources in peri-urban Kathmandu Valley in Nepal reshape water use, access and rights as well as user communities themselves, by creating and reproducing new and existing exclusions and solidarities. Traditional caste-based discriminatory practices, prohibiting Dalits from physically accessing water from sources used by higher castes, are said to be no longer practiced in Nepal. However, our findings show that, exclusion persists for Dalits even though the characteristics of exclusion have changed. In situations of competing water claims in the research location, Dalit households, unlike higher-caste groups, are unable to exercise prior-use water rights. Their water insecurity is compounded by their relative inability to mobilise political, social and economic resources to claim and access new water services and institutions. By juxtaposing the hydro-social and social exclusion analytical frameworks, we demonstrate how exclusions as well as interpretations and experiences of water (in)security are reified in post-Maoist, supposedly inclusive Nepal.