The Education Act 1971 is the main policy document under which schools in Nepal are operated. With the change in political regime, this policy has been amended as per the ideology of the incoming regime. Although private schools started to show their influence in Nepal in the late 1980s, excessive growth of private schools began with the neoliberal policy adopted by the incoming political parties soon after Nepal became a multiparty democratic country in the early 1990s. However, with the Maoists becoming a dominant political force in the country in the late 1990s, several challenges in the operation of private schools began. Issues such as closing down or monitoring of private schools are now common mass media headlines. This paper analyses such a situation in the operation of private schools in Nepal. It uses primary sources of data collected via semi-structured interviews with teachers, administrators and principals of two private schools located in the capital city of Nepal, Kathmandu. It also uses secondary sources that include mass media output and other documentary sources such as documents from private schools’ associations and government policy related to private schools. This study found that operation of private schools in Nepal is comparable to what Michel Foucault calls tolerated illegality.