This paper focuses on the institutional dynamics of family-led organic farms in the mountains of Nepal. It is based on continuous observations and experiences of local farmers who have dedicated themselves to organic agriculture for a significant period of time. It is found that family-led organic farming can contribute significantly to the sustainable use of local agricultural resources. The family, as an autonomous institution, is found to be effective for governance of local agricultural resources by transferring indigenous knowledge systems and traditional farming technologies to successive generations. We realised that it is most important to recognise local processes that govern the use of agricultural resources and local innovations that augment the practices of organic farming. It is concluded that family farms in mountainous regions of Nepal should be developed as an important sector of agriculture by enacting sound policies for local agricultural resources governance, empowering regional development bodies, and strengthening local market.