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The re-emergence of dengue virus in Nepal and the recent widespread disease epidemics of unprecedented magnitude have raised a great public health concern. There are very few reports on Dengue virus (DENV) strains circulating in the country, especially at the molecular phylogenetics level. In this study, clinical samples from an outbreak in Nepal in 2013, which were positive for DENV serotype 2, were characterized by targeted genome sequencing. Envelope protein (E) coding region from fifteen samples were sequenced and compared with DENV-2 sequences of strains from different geographic regions obtained from the GenBank. Compared to the prototype New Guinea C strain, the samples had a total of eleven non-synonymous substitutions in the envelope protein coding region leading to amino acid change at positions 47, 52, 71, 126, 129, 149, 164, 390, 402, 454 and 462. However, none of these sites were found to be positively selected. A major observation was the presence of two distinct genotypes (Cosmopolitan Genotype IVa and Asian II) in the outbreak as seen by the phylogenetic analysis. It gives the first evidence of the introduction of Cosmopolitan Genotype IVa in Nepal. These strains replace the Genotype IVb strains prevalent earlier since 2004. Both genotypes had closer genetic relation to strains from other countries indicating possibility of exotic introduction. The Genotype IVa strain seems to be more adapted in C6/36 mosquito cells as indicated by its marginally increased replication rate than the Asian II strain in in vitro infection kinetics assays. The genotype replacement and co-circulation of two distinct genotypes may have significant consequences in dengue epidemiology and disease dynamics in Nepal in years to come. [ABSTRACT FROM AUTHOR]