The Government of Nepal, with the support of the Japan International Cooperation Agency (JICA), conducted a benchmarking activity with performance indicators, water quality tests, and a consumer survey for 26 larger and older town water supply services in the country. Performance indicators varied widely between the different towns: number of staff/1,000 connection (staff ratio), for example, ranged from 2.8 to 15.3, whereas water supply coverage ranged from 13.8% to 98.4%, and operating ratios which indicate financial performance ranged from 0.24 to 2.8. Critically poor biological water quality was found in water quality tests that 55% of tap water samples were E. coli-contaminated. Overall, customer satisfaction ranged between 14% and 97%. Analysis showed that the operating ratio was significantly correlated with the staff ratio, the number of water supply connections, the water coverage, and the metered ratio. Results of water quality tests and the consumer survey revealed risk in direct drinking of tap water and a need to improve tap water quality by managing free residual chlorine and leakage reduction. Customers' satisfaction with water sufficiency was found to be significantly correlated with their perception of the reliability of supply time rather than the number of supply hours and water consumption rate.