Nepal is predominantly an agricultural country. More than 35% of its GDP depends on agriculture. About 65% of Nepalese people rely agriculture for their livelihood. Agricultural credit plays a major role in agricultural development. Different sources are available in the agricultural credit market in Nepal. Formal sources include agricultural development bank, farmers’ cooperatives, and other financial institutions while informal sources include borrowing from farmers group, women group, and money lender individual (mostly relatives). Several factors might play a role in selecting different credit sources : types of agricultural commodities, buying different operating inputs (machinery, seeds, and fertilizers), buying fixed inputs (machinery and equipment), interest rate, and reimbursement plan. In this paper, we want to determine which source is the most popular among the farmers of Nepal and explain why that particular source is a choice for farmers. We use Nepalese agricultural census data for the fiscal year 2011/12 and multinomial logit model for this analysis. The result of this study will explain the factors affecting the choice of agricultural credit and most popular credit sources in Nepal and come up with some policy recommendations. This would enrich literature in explaining the choice of agricultural credit sources in other developing countries like Nepal.