This paper examines the sustainability of vegetable production systems as compared with traditional cereal cropping patterns in terms of their ecological suitability, economic profitability, social acceptability and institutional viability. An assessment was carried out using combined quantitative and qualitative data collected from on-farm experimental plots, soil and plant sample analysis, a household survey, focus group discussions and a workshop in Pokhare Khola Watershed of Middle Mountain Nepal. The study showed that adoption of vegetable farming improved the socio-economic condition of the upland farmers, particularly the poor, women and disadvantaged groups, in terms of their food security, farm income, resource accessibility, employment opportunity and social status. These indicators revealed that vegetable-based cropping patterns are economically profitable and socially acceptable and thus contribute somewhat to the sustainability of upland farming. However, such achievement has been made through intensive cultivation practices such as increased use of agrochemicals and hybrid seed, that have led to declining soil fertility and increasing dependency of farmers on external inputs in commercial vegetable production and, therefore, threaten the sustainability of mountain farming in the long run. Additionally, institutional mechanisms for vegetable production and marketing are minimal and do not squarely address problems of upland farming. To ensure environmentally and socially sustainable production, government policy and programmes should promote locally available resources for vegetable production and support market mechanisms which can be competitive in national and international markets.