The paper explores how COVID-19-related moral panics have led to fear and othering practices among returnee Nepalese migrants from India and Muslims living in Nepal. This qualitative study included in-depth interviews with 15 returnee migrants, 15 Muslims from Kapilvastu and Banke districts of Nepal, and eight interviews with media and health professionals, and representatives from migration organisations. Four themes emerged from our data analysis: (1) rumours and mis/disinformation; (2) impact of rumours on marginalised groups (with three sub-themes: (i) perceived fear; (ii) othering practices; (iii) health and social impact); (3) resistance; and (4) institutional response against rumours. Findings suggest that rumours and misinformation were fuelled by various media platforms, especially social media (e.g., Facebook, YouTube) during the initial months of the lockdown. This created a moral panic which led to returnee migrants and Muslim populations experiencing fear and social isolation. Resistance and effective institutional responses to dispel rumours were limited. A key contribution of the paper is to highlight the lived experiences of COVID-19 related rumours on marginalised groups. The paper argues that there is a need for clear government action using health promotion messages to tackle rumours (health-related or otherwise), mis/disinformation and mitigating the consequences (hatred and tensions) at the community level.