Rice is Nepal’s primary food crop, central to national food security and rural livelihoods. Yet, limited research has explored farmers’ perceptions of rice production trends and marketing dynamics in the Terai region. This study examined production patterns, marketing mechanisms, and major constraints in rice cultivation across Jhapa, Rupandehi, and Kailali districts. Primary data were collected in 2022 from 360 farmers, 90 traders, and 30 key informants, supported by focus group discussions and literature review. Most farmers perceived a decline in rice production and yield over the past five years, particularly in Kailali, indicating localized production stress. In contrast, the majority viewed cultivated area as stable, suggesting a perception gap with official data showing gradual area decline. Regional differences were notable: Jhapa exhibited greater adoption of collective marketing and storage, while central and western districts faced stricter buyer demands, reflecting the influence of local infrastructure and institutions. High production costs, price volatility, and limited financial access were identified as the most severe constraints, exceeding agronomic concerns such as irrigation and pest issues. The study offers evidence-based insights for policymakers, development agencies, and market actors. It highlights the need for region-specific and inclusive policies that strengthen market access, financial services, and awareness of mechanisms like the Minimum Support Price. The findings further call for government investment in storage, collective marketing, and digital systems to promote fair pricing and stable farmer incomes. Overall, the study advocates a shift from production-focused approaches to integrated value chain development for sustainable rice sector growth in the Terai region of Nepal.