Nepalese Washi Papers are made from the inner bark fibre of lokta and argeli, plants that grows in the high altitude forests of the Himalayan foothills. Lokta (daphne bholua) grows above 3000 metres and produces a strong durable paper. Argeli (edgeworthia papyrefera) is found above 2000 meters and makes a soft, delicate paper. Argeli fibre is also used for papermaking in Japan where it is called mitsumata. These fibres are a renewable resource. Plants are cropped above ground level and re-grow from the radial root. They can be reharvested after 3 to 4 years.

The stripped bark is boiled in an alkali solution which breaks down the lignin in the cell walls allowing the fibres to separate. Traditionally a lye of ashes was used for this purpose, formed by dripping water through a basket of hardwood ashes. In the last 20 to 30 years this has been replaced throughout Nepal by caustic soda. Caustic soda, however, damages the fibres producing paper that lacks the strength and durability of traditional Nepalese papers. Khadi mountain papers are the only papers produced in Nepal using soda ash instead of caustic soda. This does not harm the fibres and results in papers of a quality not seen in Nepal for a generation. The run-off can also be used as a fertiliser.

Khadi Nepalese washi is paper made using the Japanese dipping and layering method called nagashizuki. In this method the sheet is formed on a mat of fine bamboo called a su. The wet sheet is transferred from the su onto a pile of sheets which are then pressed to remove water. No interleaving with felts is necessary. The sheets of paper are carefully separated and brushed onto zinc sheets to dry.