Education is a key enabler to quality of life outcomes. One of the main questions for policy makers today is how to structure education and measure its results on people, to see whether it is achieving its goal. With less than three years before the Millennium Development Goal Deadline in 2015, many countries are yet to reinvent education in ways that it will enable their citizens to establish the lives they deserve to enable them to contribute to a fair society. The recognition of education as a basic human right and the corresponding global push has seen millions of children that were previously deprived of education having been brought in school. Yet, at the same time research as well as the daily reality shows that the current education systems do not meet the requirement for preparing people to live, work and participate in today's societies, let alone those of tomorrow. With global economic recessions and booming population, education needs to be ready to step up to the challenge and enable people to be ready for being an active part of the future's society. Within this context, this thesis explores the potential of the capability approach as an evaluative framework to assess two core components of the education system; equity and quality, with the aim of guiding the reinvention of quality as a means for people to fulfil their capabilities and establish overall well being. The capabilities approach is described in detail, and then it is applied to the context of education in Nepal. The former Himalayan Hindu kingdom is currently going through a number of transitions in terms of moving from a society ruled through the principle of humans being of different value and purpose in life that was conceptualized through the caste system to a federal democratic republic that needs to find a way to provide adequate space in its structure for its more than 100 different ethnicities and languages, its ways of embracing innovation without losing cultural heritage and its ongoing experiment of using democracy as a way to leave the scars of the ten year civil war behind them. Nepal is therefore been selected as a country case study with regard to the question of whether the use of the capability approach as a theoretical framework in education can turn its diversity into an opportunity rather tan it becoming a threat to the nation. This thesis concludes that the capabilities approach is suitable for measurement of quality and equity within education. It is able to provide context specific indicators while protecting the most marginalized, and also provides a framework within which context specific indicators can be compared nationally and internationally.