Background: Evidence of the influence of water, sanitation and hygiene (WASH) behaviors on childhood nutritional status is inconsistent. Few studies have examined their interactive effects. This study aimed to examine associations and interactions between WASH variables and preschool child undernutrition. Methods: Data from a nationally representative sample of 2352 children assessed during the 2016 Nepal Demographic and Health Survey were analyzed by multi-variable linear regression to understand the association between height-forage (HAZ), weight-for-height (WHZ) and weight-forage (WAZ) z-scores and WASH variables. Interactions between WASH variables, sex and area of residence on childhood nutritional status were also examined. Results: The mean z-score [standard deviation] for children's WAZ, HAZ and WHZ scores were − 1.33 [1.1], − 1.52 [1.3] and − 0.65 [1.1], respectively. A unit increase in cluster sanitation coverage was associated with an increase of 0.30 (95%CI: 0.12 to 0.48) for WAZ and 0.28 (95%CI: 0.001 to 0.56) for HAZ scores. Household water purification practice was associated with an increase of 0.24 (95%CI: 0.07 to 0.41) in WHZ score. Handwashing practice with water and soap was associated with an increase of 0.15 (95%CI: 0.04 to 0.25) in WAZ and 0.13 (95%CI: 0.01 to 0.24) in WHZ scores. The effect of water purification practice was higher for rural areas compared to urban settings for HAZ scores (p-value for interaction = 0.02). Conclusions: Consistent with findings from other countries in the South Asian region, findings of this study highlight the potential importance of good WASH practices, and therefore the potential of WASH interventions, to contribute to improved nutritional status in rural Nepal.