Background Few previous studies have examined non-wealth-based inequalities in child mortality within developing countries. This study estimates changes in under-5-year-olds and neonatal mortality in Nepal across a range of subnational levels, which allows us to assess the degree of equity in Nepal's progress towards Millennium Development Goal 4. Methods Direct estimates of under-5-year-olds and neonatal death rates were generated for 1990–2005 using three Demographic and Health Surveys and two Living Standards Surveys by the following levels: national, rural/urban location, ecological region, development region, ethnicity and wealth. Absolute and relative inequalities were measured by rate differences and rate ratios, respectively. Additionally, wealth-related inequality was calculated using slope and relative indexes of inequality and concentration indices. Results Estimates suggest that while most rates of under-5-year-olds and neonatal mortality have declined across the different equity markers, leading to a downward trend in absolute inequalities, relative inequalities appear to have remained stable over time. The decline in absolute inequalities is strongest for under-5-year-olds’ mortality, with no statistically significant trend in either relative or absolute inequalities found for neonatal mortality. A possible increase in inequalities, at least in relative terms, was found across development regions, where death rates remain high in the mid-western region. Conclusions By 2015, our estimates suggest that more than 65% of deaths of under-5-year-olds will occur in the neonatal period, with stable trends in neonatal mortality inequalities. These findings along with the fact that health outcomes for neonates are more highly dependent on health systems, suggest further equitable reductions in under-5-year-olds mortality will require broad health-system strengthening, with a focus on the improvement of healthcare services provided for mothers and newborns. Other inequities suggest continued special attention for vulnerable subpopulations is warranted, particularly to overcome social exclusion and financial barriers to care in urban areas.