We report on two years of Japanese encephalitis (JE) surveillance in Nepal and the implications for a national immunization strategy. From May 2004 to April 2006, 4,652 patients with encephalitis were evaluated. A serum or cerebrospinal fluid specimen was collected from 3198 (69%) patients of which 1,035 (32%) were positive by Japanese encephalitis IgM ELISA. Most cases (N = 951, 92%) were from the 24 Terai districts (i.e., southern plains, 12.3 million persons) with the majority (N = 616, 65%) from four western Terai districts (population = 1.8 million). The case fatality ratio was 14.7% and 6.3% and the proportion of cases under 15 years old was 52% and 62% in the four western and 20 non-western Terai districts, respectively. Japanese encephalitis immunization targeting residents one year of age and older in the western districts and one through 14 years old in the non-western Terai districts may have reduced Japanese encephalitis cases by 84% and deaths by 92%, nationally.