The central Kathmandu tourist district of Thamel has become a centre for illegal trade in guns and small arms.
Kathmandu's police chief said the area was becoming increasingly violent because of its popularity with the city's drug dealers and criminals.
With cheap restaurants, backpacker hostels and shops, Thamel has long been the tourist capital of Nepal.
Most tourists spend at least a day here before heading out into the country to go trekking or rafting.
But in recent years, the cafes selling banana pancakes and vegetarian food have been joined by strip bars and dance clubs, many of them employing underage girls who have been trafficked into the capital from the countryside.
"We're finding a lot of criminal transactions are taking place in Thamel," said Superintendent of Police Ramesh Kharel.
"We're trying to contain the growing gun culture, but the problem remains."
Thamel shopkeepers say that criminal gangs are gaining more and more power in the district.
"They come here at night and fight and even fire their guns," said one shopkeeper who refused to give his name out of fear.
"We're all scared, we want freedom from this, but there are too many of them," he said.
Superintendent Kharel said that many of the guns used by the gangs were smuggled over the border from India, in particular from the states of Uttar Pradesh and Bihar.
"There is a well-known gun culture in these places and it's easy for criminals to cross the border without being checked," he said.
He added that he had seen an increase in small arms coming into Nepal from Lhasa, across the northern Chinese border.
A local resident, who also declined to give his name, said that Thamel was becoming notorious as Kathmandu's red-light and hard-drinking district.
"It's very difficult for the women in my family to walk through the streets without being harassed," he said.
He said he was worried that the increase in violence would scare foreign tourists away.
Superintendent Kharel said the police had increased patrols and stepped up intelligence gathering in the area.
"We're working very hard. In a couple of months we'll contain this problem," he said.