Abstract-In this paper, we deal with biogas production potential from urban wastewater based on published information. The usual practice of the wastewater handling in urban cities of Nepal is either direct discharge into the rivers and streams or discharge into the septic tanks. In both cases adverse environmental impacts has perceived through directly polluting rivers and streams as well as releasing methane, ammonia and hydrogen sulphide to the atmosphere. In addition to that, the lost opportunity of biogas production along with potential carbon trading can be realized which also help to make the project economically and environmentally sustainable. An estimation of methane (CH 4 ) production and carbon emission reduction from urban wastewater are being done allowing wastewater treatment in an anaerobic baffled reactor (ABR) and upflow anaerobic sludge blanket (UASB). In this regard, average value of some pilot plant experimental results of efficiency of chemical oxygen demand (COD) removal at ABR and UASB from various studies have been taken into consideration. The estimated biogas production potential from urban wastewater is about 22 million m 3 / year equivalent to 14.5MW th, at the same time the carbon dioxide (CO 2 ) emission reduction potential is about 94,500 tons per year. An estimated revenue collection potential through fuel substitution is about 8 million USD per annum while additional benefits from GHG reduction and other improved condition of health, pollution and reuse of wastewater is significantly remarkable.Index Terms-Energy recovery, wastewater, anaerobic baffled reactor, upflow anaerobic sludge blanket, chemical oxygen demand.