Rebels have launched an attack on the Nepalese town of Chautara, about 100km (60 miles) east of Kathmandu, sparking a battle with security forces.
Hundreds of Maoists stormed the town and fought for six hours, attacking government offices and a prison, an official told Reuters news agency.
Communications were cut and information on casualties was not available.
Kathmandu, the capital, is imposing a new curfew though the next big protest rally is not due until Tuesday.
The measure is in force on Monday from 1100 (0515 GMT) until 1800.
The Chautara attack appeared to be "pretty big", the official told Reuters, declining to be named.
District authorities had requested helicopter support and reinforcements were being sent to the area, he added.
The area is said to be a stronghold for the rebels who control large swathes of the Nepalese countryside.
More than 13,000 people have died in the 10-year Maoist insurgency aimed at replacing the monarchy with a communist republic.
Violence has escalated since the rebels ended a truce in January although they declared a ceasefire in Kathmandu this month as street protests began against King Gyanendra's absolutist rule.
Day of protest
The alliance of political parties opposed to the king hopes to attract half a million people to a rally in Kathmandu on Tuesday.
The opposition parties say the king's recent invitation to them to form a government does not go nearly far enough, as the monarch would still be free to fire prime ministers at will.
The Maoists control much of the Nepalese countryside
They want an elected assembly to write a new constitution and also a process to draw the Maoist rebels into peaceful politics.
"Until the parliament is reinstated, the problems of the Nepali people cannot be resolved," said Krishna Situala, spokesman for the Nepali Congress, the country's largest party.
"We rejected the king's offer because we believe he wants to form a government that he can control. This is just a ploy to try and extinguish our struggle."
On Sunday, police again fired rubber bullets and tear gas to disperse tens of thousands of demonstrators.
Recall of parliament
Election of constituent assembly to write constitution
New constitution to decide monarchy's role
There were fewer protesters than during the previous three days.
This was perhaps because would-be demonstrators were weighed down by a fourth successive daytime curfew, or hampered by the government's sudden cutting of the mobile phone network, the BBC's Charles Haviland reports from the city.
Yet there were several clashes between crowds and police, the biggest of them on the north-western outskirts, where police beat back up to 30,000 protesters with batons.
The mood of the demonstrators is getting steadily more republican, our correspondent notes.