Background Transactional sex, which involves the exchange of sex for money, goods or other items of value, has been associated with adverse health outcomes, such as HIV and other sexually transmitted infections, mental health challenges, and substance use. Although transactional sex has been extensively studied globally among cisgender and transgender women, there is a lack of comprehensive understanding regarding its prevalence and correlates among gay, bisexual and other men who have sex with men (GBMSM), particularly in Nepal. Thus, this study aimed to examine the prevalence of transactional sex and its associated factors among GBMSM in Nepal. Methods A cross-sectional survey was conducted among GBMSM in Kathmandu Valley, Nepal, between October and December 2022 (N = 250). We collected information on participants’ sociodemographic characteristics, sexual and other behavioural characteristics, and their engagement in transactional sex. Bivariate and multivariate logistic regression analyses were performed to determine the factors associated with transactional sex. Results The average age of participants was 27.5 years (s.d. 8.9). Overall, 16.4% reported engaging in transactional sex within the past 6 months. Participants with more financial dependants (aOR: 1.2, 95% CI: 1.0–1.5) and those who had experienced police detention (aOR: 4.8, 95% CI: 1.1–19.6) were more likely to engage in transactional sex. In contrast, GBMSM who reported engaging in condomless sex were less likely to engage in transactional sex (aOR: 0.02, 95% CI: 0.06–0.1). Conclusions The study findings underscore a noteworthy prevalence of transactional sex and associated socioeconomic and behavioural factors among GBMSM in Nepal. These results underscore the need for targeted interventions addressing both economic vulnerabilities and legal interactions to reduce transactional sex and its associated risks in this high-risk group.