Background: The diagnostic category of “acute and transient psychotic disorders” (ATPD) comprises of psychotic disorders with features of acute onset (within 2 weeks), presence of typical syndromes that are either polymorphic or schizophrenic or persistently delusional, evidence for associated acute stress and complete recovery in most cases within 2–3 months. Studies of diagnostic stability among patients with the initial diagnosis of ATPD at their first admission have reported modest stabilities spanning over different periods of time, with higher levels of stability reported in samples from the developing countries. This study aimed at investigating the diagnostic stability of cases of ATPD at the Mental Hospital, Lagankhel over a period of 3 months from the first diagnosis. Methods: ASeventy-five drug naïve patients with the initial diagnosis of first episode ATPD admitted at the in-patient unit of Mental Hospital, Lagankhel were followed up longitudinally and their diagnosis was assessed independently by two consultant psychiatrists over a period of 3 months. Results: Average age of the sample was 30.71 years. 66.7% of the cases retained their index diagnosis of ATPD at 3 months, while the remaining required diagnostic revision. A higher number of patients had their diagnosis revised to Affective Disorders including Mania and Severe depression with psychotic features (13.88%) when compared to Schizophrenia (6.94%). Conclusion: ATPD is a relatively stable diagnostic category in the Nepalese Scenario as well with more than two third of the patients retaining the initial diagnosis at 3 months.