Federalism is the centrepiece reform of Nepal’s 2015 post-conflict Constitution. However, the seven new provinces face considerable challenges as they seek to facilitate the redressal of socio-economic inequality and improve sensitivity to regional difference – historic drivers of conflict. Building on the concept of hourglass federalism to engage the discourse on decentralization in conflict-affected contexts, we highlight how Nepal’s constitutionally enshrined, autonomous third tier of local government may be better situated to work towards these ends. We argue that while the hourglass schematic has already delivered on some of the key aims of the new Constitution (like inclusion), several important challenges remain, including the decentralization of the political party system and economies of scale. Unless the initial inclusion dividend and increased responsiveness of government are consolidated, there is a risk that the state will be gradually recentralized (in practice), undermining the gains of the post-conflict constitution-making process.