This came to light after three persons were arrested by Nepal Police from the Nepal-India border Sunday night while they were trying to smuggle eight kg of gold to India.
Nepal police had earlier suspected that a huge amount of gold was being smuggled from Tibet via Nepal but could not get any proof.
The three smugglers were arrested from Nemuwa along the Ithari-Biratnagar road and were produced at a press conference Monday by the local police.
Biratnagar borders Jogbani city in Araria district in India's Bihar state.
Police arrested the smugglers in the course of regular security screening while the latter were travelling to Biratnagar from Kathmandu in a car. The value of the seized gold is around 40 million Nepalese rupees in the local market.
Those arrested are Shekhar Mahato and Amar Mahato of Biratnagar-11 and Kailash Soni of Rangeli in Nepal's Morang district, Bish Raj Pokharel, superintendent of police, said.
The smugglers had brought the gold from Hong Kong, which was then transported through the Nepal-Tibet border to Nepal at a time when demand for the yellow metal is high in India.
They used private vehicles to transport the gold to India, said the police.
Police had received a tip-off from an unknown source and accordingly upped the vigil and arrested them, said Pokharel.
Soni had wrapped four kg of gold around his legs while the other four kg was placed under the mat below the driver's seat.
The vehicle used for smuggling belongs to Shekhar. During a press conference at Morang Police Office the trio admitted they were involved in gold smuggling.
Police have launched an investigation into the incident. According to Nepal customs rules, one kg of gold was worth a half a million Nepalese rupees in customs duty.
Meanwhile, the police also arrested an Indian national, Mohamad Ajad, 40, for illegally possessing $38,500.
Ajad was arrested from Tribhuvan International Airport Monday as he was trying to board an Air Arabia flight to New Delhi. He was picked up during regular checking by police and sent for further questioning.
Earlier Saturday, another Indian national, Laxmi Nidhi, was arrested from Kathmandu with Rs.100,000 in Indian rupees when she was about to board a Delhi-bound Spice Jet flight.