Pancharam Bishwokarma, who ran a gold jewelry shop about 300 kilometres east of the capital Kathmandu, won the bet but lost his life, according to police inspector Sanjeev Khadka.
On Jan 16, Bishwokarma was challenged by his drinking buddy Tshering Sherpa to empty a 750-ml bottle of Royal Stag, a local whiskey brand, within five minutes. Sherpa offered to pay for the whiskey and also give Bishwokarma 1,200 rupees (400 baht) should he win the bet.
"They had been drinking since the morning that day," Khadka said. "Bishwokarma accepted the challenge and drank the entire content of the whiskey bottle within five minutes at around 4pm.
After returning home, Bishwokarma fell ill and was taken to a local hospital for treatment.
In the days that followed, he was referred to three more hospitals before doctors gave up hope of saving him.
He was then taken to his ancestral home in Taplejung district where he died Tuesday.
"We briefly detained Sherpa for questioning. But there is no law that says betting is illegal. Also, Sherpa didn't force Bishwokarma to drink. Therefore, we released Sherpa," Khadka said.
The Himalayan Times daily quoted doctors at one of the hospitals as saying that Bishwokarma's kidneys and liver had been severely damaged by the drinking binge.
Deep Shumsher Rana, police chief of Panchthar district where the incident occurred, told Kyodo News that police are investigating whether the alcohol was adulterated.
"Alcohol adulteration is rampant in the district, so we are investigating whether the alcohol Bishwokarma drank was adulterated," Rana said.
Bishwokarma's family had to take out loans to pay for his treatment costing 300,000 rupees.
Nepalese have an average annual income of US$750.
Bishwokarma is survived by his wife, son and three daughters.