A New York-based human rights group has urged the Nepalese authorities immediately to release a group of gays and transsexuals arrested recently.
Gay rights protests - like this one in nearby Calcutta - are rare in Kathmandu
They were arrested for creating disturbances in public places in the capital, Kathmandu.
Human Rights Watch say that they have been held without charge.
It has accused the authorities of intimidating sexual minorities and has called for an investigation into allegations of violence against them.
Mistreated in custody
"Nepal's government must decide whether it wants to enforce homophobia or protect basic human rights," said Scott Long, director of the Lesbian, Gay, Bisexual and Transgender Rights Project at Human Rights Watch.
Thirty-nine gays and transgender people were on Monday arrested following complaints about sexual assaults against pedestrians during the night.
The police said the detainees were being charged under a public offence act.
Human Rights Watch said they were all members of the Blue Diamond Society (BDS), an organization that provides HIV-prevention services and campaigns for the rights of sexual minorities.
The BBC's Sushil Sharma in Kathmandu says that BDS members have complained that the detainees have been mistreated in custody, but the police have denied the allegations.
A petition seeking a ban on BDS, on grounds that Nepalese laws do not allow homosexual activities, is pending with the Supreme Court.
That has been strongly criticised by Human Rights Watch, which in July urged the government to respond to the threatened judicial ban by affirming the freedoms of association and expression.
'Punish the messenger'
"In trying to stifle the voices of sexual minorities, Nepal demonstrates its indifference to basic rights of expression and assembly," said Mr Long in a letter to the Nepalese authorities.
"In trying to silence those who document police abuse, the Nepalese government shows its determination to punish the messenger."
Human Rights Watch say that while there is no provision in Nepalese law that explicitly criminalizes homosexual conduct, the country's civil code punishes "any kind of unnatural sex" with up to one year in prison.
The group says that this provision has been used to justify arrests of men who have sex with men and transgender people.
"The Blue Diamond Society has faced harassment from the Nepalese government as they defend the rights of some of the most vulnerable members of society," said Mr Long.
There has been no comment from the government on the issue.