The authorities in Nepal say they have released three senior Maoists in an attempt to woo rebels back to peace talks.
The Maoists had demanded the release of the prisoners
The release of the three was a key condition set by the rebels in an ultimatum delivered on Monday.
A government spokesman said the Maoists should now return to negotiations, which broke down in May.
The rebels' other demands include information on the whereabouts of missing comrades, and a curb on army movements.
Kamal Thapa, government negotiator and a senior minister, ruled out restricting the movement of the army or scrapping a counter-terrorism agreement with the US.
But he said that there would be no new army offensive against the rebels.
The three rebels released were identified as Rabindra Sheshtra, Bamdev Chhetri and Mumaram Khanal.
There has been no formal response from the rebels yet to the prisoner release.
The government wants the Maoists to resume peace talks by mid-August.
In Monday's ultimatum, chief rebel negotiator Baburam Bhattarai set July 31 as the deadline for rebel demands to be met.
He accused the government of lacking powers, and called on King Gyanendra to talk directly with the rebels or to publicly grant full authority to government negotiators.
Peace talks between the government and Maoist rebels broke down in May after two rounds.
A ceasefire was agreed in January as part of an attempt to resolve the seven-year conflict which has claimed at least 7,000 lives.