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The main objective of this study is to analyze how the tourism development has marginalized the Tharu, an indigenous and ethnic group in the Terai region of Nepal. The research for this study was carried out in Chitwan National Park in Nepal, where the Tharu has been residing for a long time. The research work was based on the key informant interviews, participant observation and an analysis of secondary data taken from a variety of sources. The study reveals that the expansion of tourism has led to social differentiation developing between the Tharu and the hill migrants, as most of the business activities in the area are controlled by the hill migrants, while the Tharu have been marginalized. The study also shows that tourism has empowered the hill migrant women more than the Tharu women; as both the group women previously used to depend on their husband’s finances but now the hill migrant women are more financially independent.