On-farm runoff plots were established during 2004 and monitored for 4 years in the Pokhare Khola watershed (Nepal) in a completely randomized design with four replications of each three treatments: traditional Farmer Practice (FP) (Zea mays–Eleusine coracana), Reduced Tillage (RT; Z. mays–Vigna ungeuculata), and Commercial Vegetable with double dose of farm yard manure (CV; Z. mays–Capsicum species) to evaluate treatment effects on soil nutrient losses, nutrient balances and crop income on Bari land (rainfed terraces). Nutrient removal due to crop harvest was found to be significantly higher than nutrient loss through soil erosion, and CV treatment exhibited a significantly higher N uptake (123 kg ha-1 year-1) through crop harvest than other treatments. Moreover, the CV treatment produced significantly higher income per unit area of Bari land than the other treatments. Soil organic carbon and major nutrients losses (NPK) through soil erosion were minimal [25.5 kg ha-1 year-1 soil organic carbon (SOC) and 5.6:0.02:0.12 kg ha-1 year-1 nitrogen (N), phosphorus (P), potassium (K), respectively]. Result showed that no nutrients were lost through leaching. Nutrient losses due to soil erosion and runoff were lower than previously reported in the Middle Mountain region, indicating a need to re-evaluate the soil erosion and nutrient loss problems in this region. Interventions such as reduced tillage and double dose of FYM with vegetable production were found to be effective in maintaining soil fertility and increasing farm income compared to the traditional maize-millet production system. The nutrient balance calculations suggest that integrated nutrient management techniques such as residue incorporation and application of FYM with a minimum application of chemical fertilizer are potentially sustainable production approaches for the Mid-hills of Nepal.