As the country's anthem played, participants held up crimson, blue and white coloured cardboard placards for 10 minutes on an open ground in Kathmandu's city centre to form the flag.
Cries of "Nepal!" rang out as participants threw their coloured placards in the air to celebrate after the attempt.
Nepal's flag is the only one in the world that is not a quadrilateral. Instead it comprises two triangles.
"We conceived this idea to spread the message that all our countrymen are united under one flag," said Bhawesh Khanal, president of Human Values for Peace and Prosperity, the group that spearheaded the event.
Nepal is in the process of drafting a new constitution, a key step in a stalled peace process begun after the end of a 10-year civil war in 2006. Leaders have promised an inclusive constitution and federalism, ending gender and caste-based discrimination.
Numbered tickets were handed out to participants to keep a count of how many took part in the flag event.
"Our vision came true. Thousands of people came together to form our country's flag and claim a new world record," Khanal told AFP.
He said the group would now submit its claim with photographic and video evidence for a record to the headquarters of Guinness World Records in London. They expect a ruling within two months.
Among the participants was 15-year-old student Anita Gautam."It was an amazing experience," she told AFP. "There is a patriotic vibe here ... a sense that we have to work together to build our country."
Anil Shah, a prominent banker, was one of three official witnesses at the event.
"Watching it brought tears to my eyes. I felt proud to be a Nepali. I believe we've set a new record," he said.
The current record for the world's largest human national flag was set in February this year when 28,957 people gathered in Lahore to create a Pakistani flag, according to Guinness World Records.