Hundreds of police officers patrolled the forested area around the Pashupati temple, which was crowded with cannabis smokers celebrating the Shivaratri festival.
“There is a ban on smoking marijuana but at the same time it is a centuries-old tradition, which we have to respect,” said police officer Suman Khadka, adding that no arrests were made.
During the festival, devotees visit temples of Hindu god Shiva.
Currently, the use of marijuana is punishable by prison sentences of up to a month for users and 10 years for traffickers.
“There is really no harm in smoking marijuana, it has been proven to have medical use too," said Bimal Giri, a factory worker who bought joints for 50 rupees (44 US cents) each from a Hindu holy man.
Nepal was famous for marijuana and other narcotics in the 1960s, when hippies made their way to the Himalayan nation. Shops and tea houses used to advertise and sell it legally. However, marijuana was outlawed in 1976.