The challenges posed by climate change require that the quantity and quality of water resources in Nepal be managed with sustainable development practices. The communities around the Kaligandaki Gorge Hydropower Project in the Myagdi District of Nepal depend on river flow for most of their rural and agricultural needs. Without a sustainable development plan, the growing population of the region, confined in an area with declining water resources, will face serious challenges to economic growth. Meteorological data show increasing annual average rainfall at a slight rate of about 0.284 mm/year, with erratic annual percentage change in rainfall in the area. The mean and minimum tem-peratures show decreasing trends at the rates of 0.05°C and 0.14°C per year, respectively. An assessment of the impacts on water availability for domestic and irrigation usage in the face of competing demands caused by the hydropower development project in the Kaligandaki Gorge was undertaken. The water demand and supply modeling were conducted using the water evaluation and planning (WEAP) model, based on discharge data from the Kaligandaki River, which were obtained from the Department of Hydrology and Meteorology, Nepal. The available data from 2001 to 2003 were used to estimate the model parameters while the stability of these parameters was tested with a validation period from 2004 to 2007. The performance of the model was assessed through statistical measures of calibration with the root mean square error and coefficient of determination, whose values were 0.046％and 0.79, respectively. Two scenarios were created in addition to the base case scenario:the discharge decrement scenario and new irrigation technology scenario. Analysis showed that a prioritization of demands will be necessary in the area in the near future for the purpose of sustainability of water resources, due to climate change impacts.