An agreement to bring Nepal's Maoist rebels into government and bring permanent peace is being widely hailed as historic in the country.
Many Nepalis believe the deal can lead to peace
On Friday, the Nepalese government said it would dissolve parliament and set up an interim government that would also include the Maoists.
It followed landmark talks between the rebel's reclusive leader, Prachanda, and Prime Minister GP Koirala.
Nepal's 10-year Maoist insurgency has left around 13,000 people dead.
The BBC's Charles Haviland in Kathmandu says that there is a sense that peace is tangibly closer, but there is some concern that the accord makes no mention of the rebels abandoning violence.
One newspaper described the agreement as a "giant leap forward".
"This is a landmark agreement that has resolved an armed conflict through peaceful means," Bharat Mohan Adhikary of the Communist Party of Nepal (UML) told the Associated Press.
His party is the second largest in the country and a member of the ruling alliance.
But some politicians are more cautious and our correspondent says fear that too much has been conceded to the rebels.
STEPS TO PEACE
6 April: Mass anti-king protests break out
24 April: King reinstates parliament, gives up direct rule
30 April: Parliament votes to hold constituent assembly polls
26 May: Preliminary peace talks begin with Maoists
2 June: First Maoist rally in capital in three years
16 June: Peace talks lead to Maoist accord
"The agreement reached in an effort to restore peace is promising but there are lots of challenges," Ram Chandra Poudel, general secretary of the governing Nepali Congress, is quoted as saying by AFP.
The radical agreement will sweep away Nepal's recently restored parliament, 16-year-old constitution, and coalition government.
It will also get rid of the parallel government the Maoists run in much of the countryside.
But many point out that the Maoists have not renounced violence or mentioned decommissioning arms.
It was Prachanda's first visit to Kathmandu in 25 years
"We shouldn't believe the Maoists too soon," Kedar Prasad Humagain, a 32-year old grocer, told AFP.
"They still have not totally stopped extortions, intimidation and other sorts of violent activities."
Friday's talks in Kathmandu were the first formal ones between the government and the rebels.
Their joint statement formalised in writing an understanding reached at the height of widespread protests against the rule of King Gyanendra in April.
But differences remain between the two sides over the future of the monarchy. The rebels hope elections will clear way towards abolishing the monarchy, but the prime minister has ruled that out.