This article focuses deprivation as a means of poverty and income inequality. It studies the factors explaining deprivation at the micro-level by using factor analysis technique to formulate the deprivation index and run regression to analyse key determinants of deprivation. The data is obtained from the National Living Standard Survey 2003-04. The empirical findings show that the age and gender of households head, place of residence, educational levels, occupational status, status of financial burden in a household, access to basic services and facilities are important indicators of deprivation in the Nepalese context.