Air pollution is a major problem of the 21st century, bearing most of the burden in South Asia, with the highest rate of particulate matter (PM) concentration in recent years. This paper assesses transboundary air pollution in Kathmandu Valley’s atmosphere originating from both neighbouring countries and regional sources within Nepal. Daily average PM2.5 data (2017–2013;2020) from field-based monitoring stations in Nepal and India were used. This study employed the Hybrid Single-Particle Lagrangian Integrated Trajectory (HYSPLIT) model, Potential Source Contribution Function (PSCF) and, Concentration Weight Trajectory (CWT) models to trace back the potential source of air pollution. Aerosol Optical Depth (AOD) data at 550 nm wavelength were used to visualise the movement of air pollution. Fire data has been taken from the Fire Information for Resource Management System (FIRMS) to analyse the location and frequency of the forest fire incidents in Nepal and India. The mean annual PM2.5 in Kathmandu ranged from 39 ± 32.1 µg/m3 to 53 ± 33 µg/m3, which was found to be significantly lower than in some regions in India (Delhi 109 ± 122 µg/m3; Uttar Pradesh: 90 ± 113 µg/m3). Three distinct transport pathways from eastern, western and southern directions were identified as responsible for high PM2.5 in Kathmandu. Eastern Nepal has been found to be a major potential local source area contributing to the rise in the valley’s concentration. Higher AOD (>0.9) was observed in the southeastern and southern regions of Nepal in the pre-monsoon season. The Indo-Gangetic Plain (IGP) region closer to the Nepalese border was found to be highly polluted during winter and post-monsoon seasons. A major reason for poor air quality in Kathmandu was due to forest fire events in Nepal and crop residue burning in India. This study provides the scientific basis for effective management strategies addressing both regional and transboundary pollution through Nepal-India cross-border cooperation.