The airline was established in July 1958 as Royal Nepal Airlines Corporation (RNAC) with one Douglas DC-3. At the beginning its services was limited to Simara, Pokhara, Biratnagar and Indian cities like Patna, Calcutta and Delhi. Soon after, a turboprop Fokker F27 was added to the airline's fleet. Twin Otter and Pilatus Porter aircraft joined the airline's fleet in 1970, allowing access to the more remote and mountainous regions of the Kingdom. After extension of the runway of Kathmandu in 1972, RNA acquired Hawker Siddeley HS-748 and Boeing 727. Two Boeing 757s gradually replaced the airline's Boeing 727s. 
In 2003 and 2004 it was reported that the Nepal Government had decided to sell off 49% of its stake in Nepal Airlines to the private sector and hand over management control, while retaining a 51% share. This would provide the investment to get the airline out of the red. Operations have been discontinued to Bangalore, Bombay/Mumbai, Calcutta/Kolkata,Dhaka, Frankfurt, Karachi and London Gatwick.
The former chairman of the virtually bankrupt Nepal Airlines was jailed for massive corruption in February 2005.
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