Research Findings: Despite the prevalence of integrating early childhood education (ECE) into formal schooling, there is limited evidence on how school-based ECE affects children compared to other types of ECE, particularly in Low and Middle-Income Countries (LMICs). Therefore, this study examined school-based ECE programs compared with independent ECE programs in an urban region in Nepal. The study employed weighting estimation approaches, using unique cross-sectional data of 652 children (483 children from 138 school-based programs and 169 children from 50 independent programs) aged four years from the Lalitpur municipality. The study found that, relative to independent programs, school-based programs are negatively associated with children's development, particularly in the cognitive and socio-emotional domains. The mean differences in these outcomes remained statistically significant with medium effect sizes (d = 0.31-0.43) even after accounting for available confounders. The results also suggest that lower levels of classroom structural quality, such as teacher's education, class size, and learning resources, may partially account for the lower developmental outcomes of school-based programs compared to independent programs. Practice or Policy: The findings highlight the need for stakeholders to focus on improving the quality of school-based ECE programs to address inequity in the current ECE system in Nepal.