The Dhaka handloom industry stands as one of Nepal's oldest indigenous sectors, established over a century ago in the western region. While various studies have highlighted the decline of indigenous industries in Nepal amidst the spread of global capitalism and free-market principles, the persistence of the Dhaka industry in Western Nepal (Palpa district) amid globalization and competitive market dynamics is remarkable. This paper analyzes the factors facilitating the institutionalization of handloom industries, ensuring fabric production for over a century. Employing an exploratory approach, the study identifies the drivers behind the institutional growth of the handloom industry, drawing on a representative sample and supplementing quantitative data with qualitative interviews conducted in the study area. I contend that elitist innovation is pivotal in sustaining Nepal's handloom industry. The study area, inhabited by indigenous communities, has a rich tradition of crafting cotton fabrics for garments, which are manufactured for the market and consumed as part of their cultural heritage. Handloom products serve as essential items in the gift exchange rituals among indigenous groups. Moreover, most handloom workers are women, highlighting the intertwining of gender roles with the production process in traditional rural Nepal. Examining the cultural capital of the Magar community in Palpa, the Newar caste (merchants) from Kathmandu initiated the establishment of the Dhaka Industry and expanded its product range. They are an elitist group; they became successful in the institutionalization of the handloom. Consequently, the cultural demand for handloom products perpetuates their production, with weaving becoming a gender-specific role for women in these communities. In conclusion, this paper underscores the importance of local and indigenous industries being deeply embedded within the community's cultural fabric for their continuity. Additionally, it emphasizes the significant role of gender dynamics in sustaining Nepal's handloom industry.