Police in Nepal have closed a radio station and arrested five staff members for trying to rebroadcast a BBC interview with the Maoist rebel leader.
Prachanda gave the BBC his first ever radio interview
In the interview, Prachanda says the rebels may reconsider their opposition to the monarchy if the king holds free elections for a constituent assembly.
Radio Sagarmatha was about to broadcast when the station in the capital, Kathmandu, was raided late on Sunday.
Five staff members were arrested for what police called an act of terrorism.
The BBC's Navin Singh Khadka in Kathmandu says the BBC's news websites were inaccessible in Nepal for a period but are now available.
King Gyanendra seized power in February, saying the government had not done enough to counter the Maoist insurgency.
Radio Sagarmatha's acting manager Ghamaraj Luintel said government officials who carried out the raid had left a letter instructing the station not to resume broadcasting.
He said a case would now be filed in court against the government action.
The communication ministry said the broadcast had been stopped because the radio station was found to be airing what the government believed to be a banned item.
In an apparent reference to the interview with Prachanda, the government said the action was initiated to maintain law and order and to contain the spread of what it called fear and terrorism.
King Gyanendra seized direct power in February
The International Federation of Journalists condemned the raid.
Its president, Christopher Warren, said: "The use of intimidation tactics by the Nepalese government in attempts to silence the media and dissenting, critical voices is unacceptable."
The government introduced a controversial media law two months ago, banning news broadcasts on FM radio.
The government took action against another popular station, Kantipur FM, more than a month ago, accusing it of violating the new law.
In his BBC interview Pushpa Kamal Dahal, who is known as Prachanda, said the Maoists might change their stance on the monarchy given elections that were held under the supervision of international monitors.
The rebels have fought an armed insurgency for 10 years
"If [the] monarchy comes with that kind of position [acceptance of constituent assembly] we can think about the new situation. But right now we feel that this is not the case in our country," he said.
"History has proved that in Nepalese conditions the monarchy is the main obstacle for the cause of democratic aspirations of the masses and for the cause of peace," Mr Prachanda said.
Rabindra Mishra of the BBC Nepali service, who conducted the interview - Mr Prachanda's first ever audio interview - says his comments confirm a recent softening of the rebels' stance towards the monarchy.
Our correspondent says the government has always opposed the idea of a constituent assembly but the change in tone by the rebels might allow it to rethink its position.