Nepal's King Gyanendra has appointed the veteran political leader GP Koirala as the new prime minister.
Mr Koirala was due to have addressed Thursday's rally
But Mr Koirala was unable to attend a huge Kathmandu rally to celebrate the king's decision to recall parliament because he is seriously ill.
Sources say he is being treated for a respiratory problem at his daughter's house and is confined to his bed.
Maoist rebels have meanwhile announced a three-month unilateral truce, in a move welcomed by political leaders.
Medical sources say that Mr Koirala is "very sick" and has been receiving oxygen for an unspecified lung problem for most of the day.
The BBC's Sushil Sharma says that 85-year-old Mr Koirala, a cigarette smoker, has suffered from breathing difficulties for some time, and nearly died of respiratory problems four years ago.
Tens of thousands of people attended the open air celebrations of the king's decision to recall parliament, amid a festive atmosphere.
Leaders of parties about to form an interim government have welcomed the rebel extension to their ceasefire, although there has been no response from the government yet.
The rebels said earlier that the re-convening of parliament did not go far enough towards meeting their demands.
Meanwhile the US has hinted at an early resumption of military aid to Nepal.
Nepalis may at last be getting a glimpse of peace, says the BBC's Charles Haviland in Kathmandu.
The Maoists, who have been waging a decade-old insurgency, said they now wanted to see a new constitution drawn up.
A statement issued by rebel leader Prachanda said the group would refrain from "offensive military action" for a three-month period.
But he added that the rebels would remain in an "active defensive position".
The rebels observed a three-month ceasefire last year. The government dismissed it as a ploy and did not reciprocate.
The US Ambassador to Nepal, James Moriarty, said that his country would now consider a request for military assistance from the Nepalese government.
He said the Maoists could not be trusted until they laid down their weapons and renounced violence.
Life is starting to return to normal in the Himalayan kingdom
Prachanda said he hoped the ceasefire would encourage the formation of a new constituent assembly given the job of rewriting the constitution.
The rebels have announced plans to hold a mass meeting on Friday in Kathmandu, just before parliament meets again for the first time in four years.
Our correspondent says that the rebels have not been able to operate openly in the city since 2003.
Some 13,000 people have died since the Maoists took up arms against the king in 1996.