Understanding the impact of drought on agriculture is critical for reducing drought-related yield losses in the Koshi River Basin, Nepal. This study used the Standardized Potential Evapotranspiration Index (SPEI) to analyze drought during the crop growing season. The Lagrange interpolation method was employed to identify expected crop yields and to quantify crop yield losses in the Koshi River Basin, Nepal. Finally, the correlation method was applied to observe the relationship between yield loss and drought in the basin. Spatially, the growing seasons of maize, rice, and wheat in the hill region exhibited a more pronounced increase in the drought trend compared to the mountain and Terai regions. Similarly, the maize growing season demonstrated a more significant increasing drought trend than rice and wheat across all regions. However, the wheat growing season in the mountain exhibited an increasing drought trend. The correlations between the detrended SPEI and crop yield loss revealed that maize yields in the Terai and mountain regions are sensitive to drought in both the early stages (from sowing to tasseling) and later stages (milking, seed ripening) in the hill. Similarly, rice yields are sensitive to drought from the plant elongation to ripening in both the hill and Terai regions. Wheat yield analysis showed a weak positive relationship in all regions. The findings of our study can enhance understanding of drought conditions and their impact on crop growth stages, thereby assisting local farmers and agricultural institutions in managing crop yield loss.