Nepal's rebel Maoists agreed yesterday to hold talks on ending their decadelong insurgency, clearing the way for the release of hundreds of jailed fighters.

The new interim cabinet on Wednesday announced an indefinite ceasefire and removed the terrorist tag from the Maoists to try to kickstart talks and bring peace to the impoverished Himalayan nation.

The Maoists called their own threemonth ceasefire last week and on Thursday agreed to discussions on ending the revolt in which over 12,500 people have dead.

It is the third time that the government and rebels have called ceasefires at the same time and tried to start

peace talks, but on previous occasions, negotiations broke down and the country was plunged back into conflict.

"We are entering into a dialogue process, feeling deep responsibility for people's aspirations towards democracy and peace," said the rebel chief Prachanda, whose name means "the fierce one."

"We hope that the peace talks will not fail this time."

Cabinet minister Gopal Man Shrestha said earlier that once talks start, the government would release rebel leaders from jails across the country.

Thousands of Maoists have been detained during the insurgency and the interior ministry said up to 700 Maoists, of all ranks, were currently held.

The Royal Nepalese Army website details 53 people on its "most wanted" list of Maoists, headed by Prachanda.

Once deadly foes, the political parties and the Maoists late last year brokered a loose alliance against King Gyanendra to challenge his absolute rule proclaimed in February 2005. They brought hundreds of thousands onto the streets.

The monarch, the constitutional head of the army, backed down in the face of mass protests, which left at least 17 people dead, and recalled parliament last week after a four-year break.

The politicians immediately backed plans to call elections to a body to rewrite the constitution and limit the powers of the king -- a key demand of the Maoists who began their "people's war" in 1996 to overthrow the monarchy.

Constant battles between the rural-based Maoists and the security forces have resulted in a stalemate although Gyanendra had vowed to crush the rebellion after he sacked the government.

Analysts say the Maoists do not have the ability to take the towns and cities while the under-equipped army cannot defeat the rebels in their often mountainous rural strongholds.

Before the government's ceasefire call, Prachanda on Wednesday ruled out disarming his forces and launched a scathing attack on the nation's new political leadership in comments posted on the organisation's website.

Prachanda said it would be "suicidal" for his fighters to disarm after a decade-long insurgency while armed forces remained ready for action.

"If anybody is thinking of disarming the Maoists while keeping the 'Royal' army as it is, then they are having a suicidal dream," the article said.

The army and the defence ministry said they were awaiting formal notice of the ceasefire call.

"As both the parties have called a situation of ceasefire, there's not any offensive activity from any side," said Bishnu Dutta Uprety, the senior civil servant in the defence ministry.

He said forces would remain on duty to protect "property and life" but no offensive operations had been planned.