The irrigation development options and investment strategies available to A.I.D. in Nepal's hill country are assessed. First, review of development options concludes in favor of irrigation system improvement over expansion and of small- over large-scale projects. Considerable effort should be devoted to project design and to organizational implications, and consideration given to experimental delivery systems using pipes and conduits. On the whole, however, rain fed systems offer more promise than do irrigation systems. Review of investment strategies advocates an integrated or indirect approach and stresses the need for broad guidelines for project selection, initial emphasis on physically and socially simpler situations, and, given reported difficulties with irrigation associations, downplaying farmer cooperation. The inclusion of both hardware and software systems and both main and on-farm systems is suggested, as is development of rural electric cooperatives as promoters of technological change. Assessment of the development potential of the Terai region is urged. The study also notes that A.I.D. should not support irrigation development unless other needed outputs (e.g., better crop varieties) are included; that considerable technology is practiced by farmers and advisors in the hill country; and that assistance to the rural poor is hindered by rough physical conditions and lack of infrastructure. A report on the Small Irrigation and Soil Conservation Project in Guatemala is appended.