The Kathmandu Valley is a bowl-shaped intermontane basin, which occupies an area of 583 km 2 in the heart of the Himalayas, with its floor at ≈1400 m and the surrounding mountains attaining a height of 2000–2800 m. It is inhabited by ≈1.5 million people, concentrated mostly in three cities, Kathmandu, Patan and Bhaktapur. Due to rapid but uncontrolled urbanisation and factors such as traffic movement, emissions from brick-kilns, cement factories, waste disposal and biomass burning, environmental pollution has been constantly increasing; adversely affecting land, water, air and biological systems. In order to quantify the degree of environmental pollution using magnetic methods, magnetic susceptibility of soils, sediments and roadside materials, in and outside the Kathmandu urban area has been measured. In areas far from roads or industry, median magnetic susceptibility is between 3 and 35 × 10 −5 SI, similar to that observed in the valley-filling clastic sediments and hence consistent with geologic or pedogenic origin. In traverses of in situ susceptibility across roads, a 5-m wide zone situated on either side of the asphalt-paved road exhibits an enhancement zone with maximum susceptibility of 240–850 × 10 −5 SI occurring 0.5–2.5 m from the road edge. In urban recreational areas, magnetic susceptibility varies within a broad range (3 to >100 × 10 −5 SI) with lowest values occurring ≈50 m from surrounding roads, in areas least disturbed by human activity. A systematic increase in susceptibility towards the roads or industrial sites is observed. Within urban areas, in the vicinity of heavy traffic or industrial sites, the upper 30–50 cm of soil profiles exhibit frequent enhancement in susceptibility, of one or two orders of magnitude, higher than those expected from geologic input. Such enhancement is attributed to input from anthropogenic or industrial sources. Magneto-mineralogical analyses and scanning electron microscopy on magnetic extracts, grain size fractions or bulk samples of road dust and soils, suggest lithogenic magnetite-like minerals and anthropogenic magnetic spherules to be the dominant contributors to the magnetic susceptibility signal. As the soils, sediments and roadside material exhibit significant susceptibility contrasts, which are most effective in identifying traffic-related pollution “hotspots”, it is highly desirable that the potential of susceptibility maps of the entire area affected by urbanisation, be fully explored to assess the status of environmental degradation.