Cooking with open fire has been crucial for occupants’ health due to poor Indoor Air Quality (IAQ) in most of the rural households. IAQ is affected by many factors, such as firewood moisture, stove type, ventilation, etc. A monitoring system has been developed to find the general IAQ with Improved Cooking Stove (ICS) and Traditional Cooking Stove (TCS). Decay curve technique is utilized to calculate the Carbon Monoxide (CO) decay time. A preliminary health survey is also carried out to evaluate the dweller’s health complaints. The study is carried out in two adjoining remote villages of Palpa District in Western Nepal. The mean CO and PM2.5 concentration for ICS and TCS are 27.11 ppm and 825.4 μg/m3 (27.11 ± 14.24 ppm and 825.4 ± 730.9 μg/m3) with significant correlation (p < 0.0001) and 36.03 ppm and 1336 μg/m3 (36.03 ± 19.06 and 1336 ± 952.8) with significant correlation (p < 0.0481), respectively. From the overall sample, the mean CO and PM2.5 concentration is reduced by 29.9% and 39%, respectively. The ventilation analysis result shows more than an 80 percentage deficit in ventilation as per the minimal rate of ventilation as prescribed by American Society of Heating, Refrigerating and Air-Conditioning Engineers (ASHRAE). Moreover, the placement of chimney at a short vertical height of 1.2 m adjoining to back window is the major cause of backflow. Therefore, the study has recommended a greater focus on ventilation to control IAQ of rural mountainous households.