Background: β lactamase is a plasmid-encoded enzyme that hydrolyzes β lactam ring of β lactam antibiotics rendering them ineffective. These enzymes, produced by Staphylococcus aureus along with many other organisms, have hindered the use of many useful and once life-saving β lactam antibiotics from clinical practice. Methods: This study was aimed to compare three test methodschromogenic, acidimetric and iodometric-for the detection of β lactamase enzyme produced by 404 nosocomial induced S. aureus isolated from two Nepali hospitals, Kathmandu based hospital (KBH) and Lalitpur based Hospital (LBH). The study was carried out following standard methodology during November 2007 to June 2009 in the Department of Microbiology, Institute of Medicine, Kathmandu, Nepal. Sensitivity, specificity, efficiency, positive predictive value, and negative predictive values of the tests were calculated taking penicillin resistance and sensitivity as the standard. Results: Chromogenic method was found to be the most sensitive (98.93%) and efficient (98.51%) test and had a high positive predictive value (99.46%). Sensitivity (98.4%) and efficiency (98.27%) of iodometric method was found to be comparable to chromogenic test; its specificity (96.55 %) and positive predictive value (99.73%) were the highest among the 3 tests. Acidimetric test was the least sensitive (97.33%) and efficient (96.78%). Of note, the sensitivity and specificity of these test methods have been compromised due to the negativity of few penicillin resistant isolates and positivity of some penicillin sensitive isolates, respectively. Conclusion: Chromogenic method was found comparatively to be the best test method for the detection of β lactamase production. However, in contrast to the other two test methods whose reagents can be locally and economically prepared, chromogenic test's use has been impeded by its cost and unavailability in the local Nepali market.