OBJECTIVE Most internally displaced persons (IDPs) live in low-income countries experiencing a war; their psychosocial health has not been well addressed. We carried out a comprehensive assessment of traumatic experiences, distress symptomatology, and factors independently associated with distress among IDPs in Nepal. METHODS A cross-sectional survey was conducted among 290 IDPs in Nepal during June-July 2003. We used the Hopkins Symptom Checklist-25 (HSCL-25) to assess depression and anxiety symptoms, and the Posttraumatic Stress Disorder (PTSD) Checklist--Civilian Version (PCL-C) to assess PTSD symptoms. All these instruments were validated against local corresponding syndromes and diagnoses of Composite International Diagnostic Interviews (CIDIs) as well. RESULTS Almost everyone reported trauma and 53.4% had PTSD symptomatology. The rates of anxiety and depression symptomatology were 80.7 and 80.3%, respectively. Factors independently associated with anxiety symptomatology were illiteracy and feeling miserable on arrival at a new place. Female gender, age 41-50, and feeling miserable on arrival at a new place were associated with depression symptomatology. On the other hand, experiencing greater than three traumatic events and feeling miserable on arrival at a new place were associated with PTSD symptomatology, whereas evacuation after a weeklong preparation and lower caste appeared as protective factors. CONCLUSIONS High rates of psychological distress and associated factors were identified among highly traumatized IDPs in Nepal, thereby underlining the need for collective assistance, not only for refugees, but also for IDPs. Risk and protective factors that we have identified can thus be utilized for any kind of psychosocial interventions among these IDPs.