Kent County Council's chairman, Paulina Stockell, signed the agreement with Pashupati Parajuli, the general secretary of the Nepalese Paralympic and Olympic Committee, and Ghanshyam Khatiwada, its secretary, at County Hall in Maidstone.
The Nepali team will be one of the smallest teams competing at London but the deal with Kent is of huge symbolic importance to the region.
The Royal Gurkha Rifles, made up of soldiers from Nepal, are based in Folkstone and more than 200 families live in the area.
The deal is a culmination of a long campaign to get Nepal to base themselves in the area.·
Two years ago, Joanna Lumley, who had spearheaded a high-profile campaign for Gurkhas to be allowed to settle in Britain, hand delivered a letter to the President of Nepal from the Leader of Kent County Council, Paul Carter, inviting Nepal to train there.
Nepal sent eight athletes to the Olympics in Beijing in 2008, competing in athletics, judo, shooting, swimming, taekwondo and weightlifting.
Nepal, which is the world's youngest republic and contains eight of the world's 10 highest mountains, including the highest, Mount Everest, made its debut in the Olympics at Tokyo in 1964 but have never won a medal, although Bidhan Lama finished third in the taekwondo in Seoul in 1988 when it was a demonstration sport.
Nepal only made its debut in the Paralympics at Athens in 2004 and sent only one athlete to Beijing for the Paralympics, sprinter Jit Bahadur Khadka, who competed in the T46 category.
But they hope to also qualify competitors in powerlifting, shooting and swimming for London 2012.
Both the Olympic and Paralympic teams will be based mainly at Canterbury University and Canterbury High School.
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