The Śreṣṭha (Nepali: श्रेष्ठ) or (Newar: स्यस्य: Syaśya or श्रेष्ठ Shrestha) is the second largest Newar caste group, occupying around 21% of overall Newar population, or about 1.1% of Nepal’s total population. It is believed that the word Srēṣṭha is derived from the Newar word Śeśyah, which itself is derivation of a Sanskrit word Sista meaning 'noble', although literal meaning of the word also translated to 'best or important.' "Shrestha" itself was later adopted as the specific family surname by members of this high-caste Hindu group, although there are over 50 other recognized surnames of Srēṣṭhas. Despite their numerically low national population, their high-status and socio-economic capital puts Śreṣṭhas amongst the most socio-economically privileged and politically over-represented segments of Nepali population.

Prior to Nepal’s unification, Srēṣṭha was a collective high-status title given to those Hindu clans referred to as 'Bhāro' (from bhārdār/nobles) who served as the key non-Brahmin class of ruling, administrative and merchant class of the Malla courts. From within this broad Srēṣṭha groups are two distinct caste groups. First, they count among them the high-caste aristocratic Kshatriya, locally pronounced as Chatharīya, who are descended from the nobles and courtiers of the Malla period and consist of the ruling, land-owning and literate Hindu caste group of the Nepal Mandala, which later formed the core of government bureaucracy during the Shah and Rana period. Second, Srēṣṭha title is also attributed to the Pāñchthariya, who now mostly write their surnames as 'Shrestha', who were historically the Hindu merchant clans of the Valley, as opposed to the Buddhist merchant caste of Urāy. These Pāñchthariyas have Vaishya status in the traditional varna framework. Srēṣṭha group has also incorporated in it the socially upward Jyapu farmers and other peasants especially outside the Valley as a means of the Sanskritisation process, although their status is not accepted by the upper-level Srēṣṭha castes.

In traditional Hindu Newar society, the Srēṣṭha caste ranks second to the priestly Rājopadhyāyā Brāhman in the ritual hierarchy. In the Malla era, together with the Rājopadhyāyā Brāhman priests, the Sréṣṭhas controlled key posts of the administration and gained vested interest in the land by acquiring feudal rights over holdings. As descending from the noble houses of the Malla courts, the Kshatriyas (locally pronounced Chatharīya) are second in line in the traditional caste-bound view, their social superiority evidenced through their strict endogamous marriage relations within Chatharīyas, disallowing marriages with the Pāñchthariya-status Srēṣṭhas and other lower groups. Similarly, they have historically been strict adherents of the Brahmānic social norms and rituals (like following the custom of Upanayana, performing the Śrāddha ceremony, and being much closer to the mainstream North-Indian Hindu virtues in comparison to other Newars). They have also maintained their higher status through dining restrictions, as they do not partake in cooked rice from the hands of anyone except their Chatharīya-status clans and/or the Brāhmans, suggesting their higher-caste status than all other Newars. The Pāñchthariyas, although lower in rank than the Chatharīyas, nonetheless have socio-cultural and religious affinities with them and as the chief materially-endowed trading caste group, enjoy a considerable position of high status in the eyes of other Newar castes. Both the Srēṣṭha caste groups are traditionally Hindus, often termed as Sivamargi in local parlance. However, there are few exceptions to this norm; a few notable families like the Pradhān aristocrats of Bhagavan Bahāl in Thamel and Amatyas of Swatha, Lalitpur. have been traditional patrons of Buddhist viharas and temples, suggesting reverence towards Buddhist shrines as well, and having reverence towards the Buddhist Vajrayana Vajracharya priests.

The particular position of the dominant caste that Srēṣṭhas hold in relation to the religious, cultural, and spatial organization of the Newars can be viewed through their traditional occupational work as the patron caste to all other caste groups, most importantly as patrons to their Rājopadhyāyā Brāhman priests. Among Hindu Newars, as in traditional Hindu societies, the position of Srēṣṭhas, particularly of the Kșatriya-status Chatharīyas, in the society can be viewed through the dichotomy between their role as the sacrificer who organizes religious functions, the yajamāna, to the Brāhman priest who performs the solemn rituals. Like other North Indian societies, this dichotomy is between the Brāhman and the Kṣatriya. The former is the specialist of ritual Vedic texts, the guardian of the sacred science, the repository of the knowledge of the dharma, the ultimate authority on religious affairs. The latter represents the king, the warriors, the military, and administrators, and he has a particular affinity with all matters pertaining to material goods, and economic or political action. It is his duty to perform his dharma, his duties as the provider and protector of the Brāhman, his society, and his nation. Their relationship is complementary; a priest must have a patron, and a patron must have a priest. This quintessential Brahmānic Hindu tradition is the basis of which in local Newar customs, the Rājopadhyāyā Brāhman is given superior status to the Kșatriya Srēṣṭha even though the societal functions entirely depend on the Srēṣṭha's role as patrons.

The dichotomy between the patron-patronized relationship that defines the functional role of the Srēṣṭha extends beyond the Brāhman. Although in terms of ritual purity, the Brāhmans rank above Kșatriyas, they represent transcendental values, not local ones. It is the Kșatriyas, i.e. the Srēṣṭhas, who are the paradigmatic Newars on the traditional caste-bound view. This places Srēṣṭhas as the central caste of the entire Newar society. All other castes revolve around them, as they preside over as the patron of all other caste groups. In many traditional socio-religious events or festivals (jatras), they act as chief performers and leaders of the rituals. Among the 'pure' castes, a Srēṣṭha invites the Brāhman to perform Vedic rituals, the Karmācharya Achāju for Tantric rituals, Jyāpus to till his land, Nāu barbers to perform ritual cleaning, Chitrakārs to paint his deities and house, the Tāmrākārs to make ritual utensils, Halwāis to make ritual confections, etc. He also has to take the services of the 'impure' castes in historically purity-defining tasks; he utilizes the Nāy/Khadgi butchers to perform ritual sacrifices of animals to please the Gods and Goddesses, the Bhā/Karanjits funeral priests to perform the "katto" death ritual of eating a portion of the skull, the Jogi/Kapāli to accept the offerings during the 13-day mourning period after a death, etc.

Many belonging to Srēṣṭha caste began to adopt ‘Shrestha’ as their caste name as early as the 18th century. Srēṣṭhas are considered to be the most educated caste. They are employed in various organizations, banks, schools, universities, industries, and other private sectors. Many of them also occupy high-ranking administrative positions at governmental and non-governmental organizations. They also rank among the most astute businessmen in Nepal. Srēṣṭhas have also traditionally been the patrons of various temples of the Valley, including the famous Pasupatinath temple where traditionally Rājbhandārīs serve as caretakers and assistant priests to the chief Bhatta priests. Similarly, the Karmāchāryas, locally called Achāju (Achāryajyu) serve as the main Tantric/Smarta priests of many Shaivite or Shakta temples of Kathmandu, including that of the Taleju Bhawani temple which serves as the kuldevi of the Mallas and the Chathariyas, and also serve as the chief assistant priests of the Rajopādhyāya Brāhmins. The Joshīs similarly serve as the astrologers of the Newars. Many Srēṣṭha clans also act as chief patrons of various local deities and temples, performing the role of the protector of the various local traditions, jatras, rituals.

Although to outsiders they remain as a single non-hierarchical group, to Srēṣṭha themselves there are two major divisions within the caste which in theory and till recent times practiced caste-endogamy, non-commensality, dining restrictions, and other caste-status denoting activities between each other. Although researchers have found up to four broad divisions, the two main historically categorized groups of the Srēṣṭha caste are: Chatharīya and Pāñchthariya.

The Chatharīya (छथरिय/क्षत्रिय) (also referred to as Chatharī or Chatharé) are regarded as the Newar aristocracy and contain several subgroups within the caste, which are now treated as ritually equal. The term Chatharīya is the derivative of the word ‘Kshatriya’, the second varna of the traditional Hindu varnashrama comprising kings, warriors, and administrators. Most Chatharīyas consider themselves as the Raghuvanshi Kṣatriya descendants of the Karnat king Hari Simha Dev (14th century CE) and the entourage that came along with him to Kathmandu Valley with the attack of the Tirhut kingdom by Ghiyath al-Din Tughluq of Tughluq dynasty in 1324 CE. The presence of notable present-day Chatharīya clan titles non-indigenous to the Newars that are still prevalent among the present-day Rajputs of India has been suggested as evidence of the Chatharīya's claim to their ancestry. The Rajput clans that have been transformed as surnames among the Chatharīyas include Raghuvanshi, Rawal, Rathore, Chauhan, Chandel, and Hada. Similarly, presence of notable Bengali clans Raya, Baidya and Kayastha among Chatharīya also suggests that today's Newar Chatharīya caste is a result of the amalgamation of mostly Kshatriya, or equivalent status, clans of heterogeneous roots who immigrated to Nepal and became the ruling elite of the Malla courts. Other evidence of their non-indigenous roots compared to other Newar castes point out their generally more defined Indic-Aryan roots; their Brahmanic traditions, phenotype characteristics, and written historical genealogies. Being absorbed in the Newar society, all these groups retained their Kṣatriya varna-status while acquiring the local title of Srēṣṭha to the new populace. Although native speakers of Maithili, which was spoken as the language of the Malla courts, they adopted the Newari language and customs over the generations and divided themselves among various sub-clans and new local names. At present, they are part of the larger Newar nation, where they inter-marry with other Chatharīya status clans.