The colorful rally in downtown Kathmandu — an annual affair — drew about 500 participants.
"Our main demand is that the rights of the sexual minorities should be guaranteed in the new constitution," said Pinky Gurung of the Blue Diamond Society, a gay rights group in Nepal.
They are also demanding same-sex marriage be legalized in the new constitution, permitting gay and lesbian couples the right to adopt, buy joint property, open joint bank accounts and inherit from one another.
Nepali authorities from this year issued passports under the category "others" for those who do not want to be identified as male or female.
The people who identify themselves as "third gender" have also been issued citizenship certificates by the Nepalese government. But the community is saying only a few have been issued the identification papers and it is still difficult to get them from government offices.
The parade has been held annually for the past few years on Gaijatra, a Hindu festival observed to honor the dead.
The much-delayed constitution draft is being finalized by members of the Constituent Assembly, but political parties are still unable to agree on the number and border of the proposed federal states.
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