"Earlier, we had only two categories, men and women. But in the upcoming census, we are including a 'third gender' category," said Director of the Central Bureau of Statistics in Kathmandu Bikash Bista.
Two years ago, the Supreme Court in Nepal ordered the government to enact laws to guarantee the rights of transgender, gay, lesbian and bisexual people.
Bista said the court's ruling prompted the new category, though Nepal remains a deeply conservative country.
"We will send supervisors to each household and get the figures of the household, its members and their gender. This is when we count the number of transgenders."
Sunil Babu Pant, Nepal's first openly gay Parliamentarian, says the transgender community is delighted by the decision.
"This shows that the government has started to recognise them. I hope this will help to ensure their rights," Pant told AFP.
"But challenges remain for the community as they have often been forced to leave their villages and taken refuge in cities due to discrimination."
Pant is the creator of GLBT rights and support group the Blue Diamond Society. He will be a keynote speaker at the Wellington Outgames' Human Right Conference in March.
Another Nepalese man who has fought for the rights of transgender people in his nation is Roshan Mahato, who GayNZ.com wants to bring to the Outgames â and needs your support to help achieve it.