The constitution of Nepal Academy can be taken as an achievement of the political turnover of 1951. After the downfall of the Rana regime, significant achievements were made in the field of Nepali literature, culture, art and knowledge. In the free environment after the establishment of democracy, men of letter, artists, cultural activists and scientists started conducting new experiments in their respective fields. To include the suppressed creativity into the national mainstream, the need for a national autonomous institution was felt. But, because of political instability and disorganization, the constitution of such an institution was delayed. An institution that would represent the nation in the field of literature, culture, art and knowledge was finally established seven years after the revolution.

On June 22, 1957, His Late Majesty King Mahendra, founded an autonomous institution called Nepal Sahitya Kala Academy to promote the nation's glory through the development of literature, culture, art and knowledge. The name of this institution changed on many occasions. In the same year it was called Nepal Academy after the promulgation of the Nepal Academy Act, and it was renamed Nepal Academy on March 3, 1958. From April 1967 onwards it came to be known as Nepal Rajkiya Pragya Pratisthan. Now again according to new act 2007 it was renamed Nepal Academy. These acts brought about certain changes not only in its constitution but also in its function. When it was first established, His Majesty himself was the Chancellor; but, later, this post was given to academicians who had rendered significant services in the field of literature, culture, art and knowledge. However, in the last act, the Prime Minister was made Chancellor and the Minister for Culture, Tourism and Civil Aviation was made Pro-chancellor. but at present according to the new act of 2007 the Prime Minister is the Chief Patron, the Minister for Culture and State Restructuring is Patron of Nepal Academy.

Nepal Academy is situated in the heart of the city, it has its own huge complex at Kamaladi. Its compound occupies 50 ropanis of land and the main building has an air-conditioned exhibition hall, a library, a seminar hall and an auditorium.The various Departments of Nepal Academy were established to study Nepal's languages, literature and culture to conduct research in the field of social sciences and philosophy to honour the nation's academicians and authors to incorporate people in creative and expressive works, and to promote national and international intellectual and cultural activities. At the time of its establishment, this institution was also supposed to look after the departments of knowledge and science; but, with the establishment of Nepal Academy for Science and Technology (NAST), these two departments have been removed from NA. At present Nepal Academy focuses on five major areas:
• Language
• Literature
• Culture
• Social Sciences
• Philosophy

Nepal Academy was initially established with the objectives of developing and promoting Nepali literature, culture, art and science. But, after the changes in the Act, its objectives, too, have been modified. Nepal Academy now has the objectives of preparing and helping prepare original and well researched works in different subjects related to languages, literature, philosophy, culture and social sciences. It also aims to confer honors and distinctions upon scholars and creative artists in recognition of their contributions in their respective fields and to work for the all-round development of various fields of knowledge at the national and international levels by encouraging people's interest in and aptitude for the process of creative thinking and production of creative works. More particularly, the objectives of Nepal Academy are as follows:
• To focus on the creation of original works in the fields of languages and their literature of Nepal, culture, philosophy and social sciences
• To translate outstanding works in foreign languages into Nepali and other native languages and vice versa
• To organize talks, lectures, seminars workshops, conferences, exhibitions, etc. on topics related to language, literature, philosophy culture and social sciences, and to participate in international programs of such nature
• To maintain relations between Nepal Academy and various related international organizations.
• To honor and present awards to distinguished native and other scholars in recognition of their significant contributions to language, literature, art, crafts, music, drama, culture and social sciences
• To promote a congenial atmosphere for facilitating the works of individuals and organizations devoted to such areas
• To offer life and honorary memberships to distinguished scholars, artists and organizations
• To accomplish other works related with Nepal Academy.

Miscellaneous plans
• Publication of the studies made by different scholars under Nepal Academy's assistance.
• Writing of history of Nepali literature part-2.
• Department of World Literature and Translation
• Organize seminar on world literature.
Translation projects:
Translations of well known works of world literature into Nepali and of Nepali literature into English and other international languages. Similarly translations of Nepali literature into other languages of Nepal and vice verse.
Organization talk programs, seminars, etc. jointly with other literary bodies and associations, offering support and aid to such joint ventures.
Other Activities
Academy organizes talks, lectures, seminars, poetry recitations, and other academic programs with the participation of eminent scholars artists and poets from Nepal and abroad. Currently, most of the programs have been conducted outside Kathmandu valley. NA has also started installing statues of famous academicians and artists. Nepal Academy grants fellowships every year to native and foreign scholars to conduct research on Nepalese languages, literature, arts and crafts, music, drama, culture and social sciences.
National Genius Treatment Fund
National Genius Treatment Fund, established in 2004 (2061 B.S.), aims to provide due support to ill or indisposed academicians and scholars of national prominence contributing in the field of national and other languages and their literature, craft, art, music, stage performance, film, culture and social sciences.
Literary Journal Support Fund
Literary Journal Support Fund, established in 2004 (B.S. 2061), aims to support literary journals published under individual or collective initiatives. Disbursement of this fund is based on the duration of publication, regularity, size, total pages, geographical or subject-wise circulation, number of readers, literary contributions, and other relevant factors.