Literacy policy and programming in developing countries continues to be influenced by the assumption that without literacy, an adult is unable to function on an equal basis in society and that an individual can be easily categorised as either literate or illiterate. Although this has led to prioritisation of primary schooling over adult literacy in many national government and donor agency budgets, there has recently been a movement away from regarding adult literacy as only ‘second chance schooling’ to explore how literacy programmes can build on participants’ existing practices. In the context of these changes in international policy discourses, this article analyses how literacy and development policy and programming in Nepal has changed over the past decade. Drawing on interviews with policy makers, trainers and literacy facilitators conducted in the 1990s and 2007, the author explores the shifts taking place. The structure of literacy programmes (including links with formal schooling), literacy materials, language of instruction and concepts of ‘post literacy’ were influenced by political events during this period as well as by donor agency discourses. Findings from the Nepal case have implications for the international policy discourse, such as the need to problematise the term ‘political’ to consider the intended and unintended consequences of literacy interventions.