This was decided during the recent visit of Nepalese Deputy Prime Minister and Foreign Minister Krishna Bahadur Mahara to Beijing.
"Both sides have agreed to move forward technical works relating to construction of Nepal-China cross-border railway line," the Foreign Ministry said in a statement last week.
During the high-level talks in Beijing, Mahara had requested China to forward the work relating to preparation of a Detailed Project Report for the construction of inter- country railway line giving it high priority, it said.
It said the rail link includes two lines: one connecting three of Nepal's most important cities and two between China and Nepal.
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The daily, however, did not identify the Nepalese cities.
The Sino-Nepali railway, which passes through the Chinese border town of Zhangmu and connects with routes in Nepal, will be the first railway by which China enters South Asia, said Zhao Gancheng, director of the Centre for Asia-Pacific Studies at the Shanghai Institute for International Studies.
China last year agreed to consider building a railway into Nepal and to start a feasibility study for a free trade agreement with landlocked Nepal, which has been trying to lessen its dependence on its other big neighbour India.
Nepal also signed up to President Xi Jinping's Belt and Road initiative which is opposed by India as it passes through Pakistan-occupied Kashmir.