By Sushil Sharma
BBC News, Kathmandu
America's ambassador to Nepal has warned that the confrontation between the king and mainstream parties could help bring Maoist rebels to power.
Thousands have died in Nepal's conflict
James Moriarty said that reconciliation between "legitimate political forces" was crucial to defeat the rebels.
King Gyanendra seized direct power in February, saying political parties had failed to tackle the Maoist rebellion.
Mr Moriarty's remarks follow a widening rift between the king and the parties and escalating army-rebel violence.
Large scale attacks
"If the government and the parties do not find ways to reconcile... There is a very good chance that the Maoists could find a way to turn all of this to their advantage and ultimately end up marching in the Singh Durbar [the central government secretariat]," Mr Moriarty told the BBC.
He said that despite a series of recent setbacks, the rebels appear determined to launch large-scale attacks.
Mr Moriarty wants a dialogue to start soon
King Gyanendra and the major opposition parties have been at loggerheads since the monarch sacked a four-party coalition, seized direct powers and imposed restrictions on civil liberties in February.
He defended the move, saying it was needed to tackle the insurgency in which 12,000 people have died.
The king accused the parties of failing to resolve the conflict.
Opposition parties dubbed the royal move unconstitutional and undemocratic.
Seven major parties have been engaged in a joint protest to force the king to reverse his move. Major foreign countries, including the US, suspended military assistance to the Nepalese army in protest at what they called the undemocratic royal move.
They have also have also praised the common agenda of the political parties for the restoration of democracy.
But they have insisted that the parties and the king should begin a dialogue.
Earlier this month, US Assistant Secretary of State for South Asia Christina Rocca met the Nepalese king and the opposition leaders in Kathmandu to voice US concerns over the situation in Nepal.
She too urged both constitutional forces to unite, which she said was "crucial" to tackle the Maoist rebels.
In a separate development, there have been no official comments yet on newspaper reports that the US has delivered a shipment of non-lethal equipment to the Nepalese army.