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The rice seed market in Nepal is worth more than NRs. 600 million, with an annual demand of 20,000 tons. Rice seed production is threatened by False smut disease, caused by Ustilaginoidea virens. Although once considered minor, recent years have witnessed an alarming rise in false smut cases, causing substantial yield and economic losses globally. The disease can lead to the rejection of rice crops even at low levels, severely affecting seed producers. Depending on weather conditions and rice varieties, yield losses range from 3% to 70%. Moreover, this disease produces harmful mycotoxins, namely ustiloxins and ustilaginoidins, posing risks to human health. Initially introduced to Nepal in 1964 AD through Taiwanese varieties, localized outbreaks were observed over time, like the significant incidence in the Kanchan variety in Bhaktapur during the mid-1980s. Recent years have seen severe impacts on varieties such as Samba Mansuli, Chaite-5, Hardinath-1, and Ram Dhan in the Chitwan district, causing seed yield losses ranging from 80–90%. The disease severity is intensified by planting susceptible varieties, continuation of the same variety in specific fields, excessive use of nitrogenous fertilizers, and favorable weather conditions. Primarily the disease can be controlled by fungicide application at the booting stage. Commonly used fungicides include propiconazole, difenoconazole, and tebuconazole. However, the pivotal approach lies in cultivating resistant varieties, early planting, crop rotations, optimization of nitrogenous fertilizers and farmers’ knowledge are effective strategies for false smut management. These practices are crucial in mitigating the impact of false smut ensuring sustainable rice seed production.