The United States, the UK and other EU nations have recalled their ambassadors to Nepal to reflect their opposition to King Gyanendra's takeover of power.
The king took over nearly two weeks ago
US State Department spokesman Richard Boucher said it was "deeply concerned by developments in Nepal".
King Gyanendra assumed direct control nearly two weeks ago, saying the former government failed to tackle Maoists.
On Monday, he freed a former PM and a number of politicians and human rights workers from house arrest or detention.
US ambassador James Moriarty, British envoy Keith Bloomfield, the French ambassador and others were all recalled for consultations.
Mr Boucher said: "King Gyanendra's dismissal of the government, declaration of a state of emergency, detention of politicians, human rights workers and students and the suspension of fundamental constitutional rights is a step away from Nepal's path toward democracy."
Security is heavy in Kathmandu for the Maoist blockade
British Foreign Secretary Jack Straw, who is visiting Pakistan, said Britain "strongly" supported constitutional monarchy and multi-party democracy in Nepal.
"We continue to call upon the Maoists to end their violence and for both sides to return to the negotiating table.
"When the king dismissed his prime minister... we regarded this as a backward step which undermined Nepal's democratic institutions and risked further instability."
India has also asked Nepal to take "immediate steps" to restore multi-party democracy.
The message was conveyed to the Nepalese ambassador in Delhi by Foreign Minister Natwar Singh.
Delhi said on Monday it would review its policy of supplying military hardware to Nepal.
The king moved to ease some restrictions on Monday, when he freed former premier Surya Bahadur Thapa, a prominent lawyer and a senior leader of the country's biggest communist party.
However, the king also consolidated his power by appointing two former prime ministers, Tulsi Giri and Kirti Nidhi Bista, into his new cabinet.
They were both in power during the last time that Nepal was directly ruled by a king and are seen as staunch royalists.
The BBC's Charles Haviland in Kathmandu says that 11 people were among the latest people to be released from prison or freed from house arrest.
But our correspondent says that leaders of the two biggest parties and the recently ousted prime minister, Sher Bahadur Deuba, are still under house arrest.
The rebels have been fighting for a republic since 1996
The biggest party, the Nepali Congress, is calling for a nationwide, non-violent struggle for the restoration of democracy from this Friday. Details are still being worked out.
The new releases coincided with a visit to the country by the secretary-general of Amnesty International.
"Our first meetings with human rights defenders have highlighted a picture of insecurity, deepened by uncertainty in the wake of the state of emergency, and fear, particularly for those who remain inaccessible in remote parts of the country," Amnesty's secretary general Irene Khan said.
The organisation has now requested an audience with King Gyanendra.
Meanwhile buses and trucks are defying a blockade launched on Saturday by Maoist rebels of Nepal's highways, moving thousands of passengers and bringing fuel, food and supplies into the capital Kathmandu under military escort.
But traffic and business activity in other parts of the country are reported to be light.
"We haven't heard of any attack on our route and there are soldiers on every corner," bus driver Hari Lama told the Associated Press.
The rebels say that the royal coup has forced them to abandon earlier negotiation demands and focus on the abolition of the monarchy.