The novel approach `Payment for Watershed Protection Environmental Services` (PWES) has received considerable attention globally as a new way to improve environmental conservation and watershed management. PWES schemes, which are based on the `beneficiary pays` principle, channel payments for environmental services from beneficiaries to service providers. Even though there is a relatively good theoretical understanding of the PWES concept in Nepal, there are hardly any practical experiences on the ground. This qualitative research was carried out to study the applicability of the PWES approach for conservation of watersheds in the Churia Region of Nepal. A conceptual framework was developed and used as an analytical lens throughout the entire study. First, the study analysed global experiences and, building on this, identified success factors for PWES implementation. Hereafter, the current context of Churia watersheds was compared with these success factors to identify opportunities and challenges and to derive recommendations for the research area. Tools and methods such as literature reviews, interviews, and one workshop were used to conduct the research. The study comes to the conclusion that the instrument of PWES should be in principle applicable to Churia watersheds. Increased demand for environmental services, provision of new financial sources for conservation and positive spin-offs to different sectors are key opportunities. However, there are a few challenges that need to be overcome such as time gaps in the production of environmental services; traditional land rights and; the lack of willingness and capacity to pay. In short, PWES is a complex approach, which has to be implemented carefully starting at small scales and adapting it to the specific local context of the Churia area.