Nepal's Cabinet declared a ceasefire yesterday with Maoist rebels and urged them to open peace talks with the government, Deputy Prime Minister Khadga Prasad Oli said.
He added that all terrorism-related charges will be dropped against the insurgents, and the government will end its designation of the Maoists as a terrorist group.
The moves are in response to the unilateral truce announced by the rebels after three weeks of often-bloody protests forced King Gyanendra to yield control over the government last week.
The Maoists played a key role in the protests and appear headed for a role in the political mainstream.
They have been fighting since 1996 to create a communist state. The insurgency has left 13,000 people dead.
Two previous mutual ceasefires -- in 2001 and 2003 -- both broke down after a few months.
"The government decided to declare a ceasefire," Oli said. "All terrorist charges on the Maoists have been removed. We are urging the Maoists to come forward for peace talks."
Added Finance Minister Ram Sharan Mahat: "We expect the Maoists to come to the talks."
But in a worrying sign, Prachanda, the Maoists' leader, has accused the seven-party alliance that led the protests against the king of engaging in a power struggle.
He said that the legislature -- which convened on Friday for the first time in four years -- wasn't up to the tasks at hand.
"This is not the solution to the problems and the demand of the Maoists," he wrote in a pro-Maoist weekly newspaper.
"The House has no fresh mandate and cannot solve the problems," he wrote.