Many Nepalese are looking forward to becoming the world's newest republic
Nepal is due to become a republic and end 240 years of royal rule.
A newly-elected assembly is meeting in Kathmandu to discuss abolishing the monarchy. Voting is under way, after being delayed for several hours.
Ahead of the meeting, at least three small bombs went off in the capital - one on Tuesday and two on Wednesday - injuring at least three people.
Meanwhile thousands gathered on the streets of the capital and near the assembly in support of "republic day".
"Let's celebrate the dawn of a republic in a grand manner," a voice blared from one loudspeaker, Reuters news agency says.
"This is the people's victory," former Maoist Kamal Dahal, 22, told Reuters news agency.
Some 1,500 police, some with body armour and shields, ringed the conference centre where the assembly was meeting.
It has also been enclosed by a ring of razor wire.
Nepal stands on the brink of huge change, says the BBC's Charles Haviland in the capital Kathmandu.
People celebrating and marching on streets of Kathmandu
The Maoists, who emerged as the largest party in last month's elections, are committed to removing the monarchy.
They entered the political arena after signing a peace deal in 2006 ending a decade-long insurgency.
Leave the palace
The assembly is huge and Tuesday's ceremony, performed by an older member of the newly-elected body, saw 575 men and women being sworn in.
Has ruled for 238 years
Monarchs seen as incarnations of the Hindu God Vishnu
King Birendra killed in 2001 palace massacre by Crown Prince Dipendra, after which Birendra's brother Gyanendra becomes king
Oct 2002: King Gyanendra dismisses elected government, then a year later declares state of emergency
Feb 2005: Assumes complete control
April 2006: Mass demonstrations lead to end of direct palace rule
Many wore traditional clothing and used their mother tongues for the occasion in this ethnically mixed country.
The assembly has been given the initial task of rubber-stamping the abolition of the monarchy.
But the vote was delayed while the Maoists and the other main parties settled differences about distribution of power between the president and the prime minister in an interim period.
The assembly then has two years to come up with permanent arrangements for a new constitution.
Reports said King Gyanendra and Queen Komal were seen driving out of the royal palace on Tuesday afternoon, but it was not clear where they were going or for how long they would be gone.
Nepal's progress towards becoming the world's newest republic has been marred by bombs being planted in the capital for three days running this week.
One person was injured when a bomb exploded at an open-air theatre in Kathmandu on Wednesday evening.
Another went off outside the assembly venue but no-one was hurt.
Officials say they will be given 15 days to vacate the palace.
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On Tuesday, two explosive devices were left in a city centre park, but police said only one exploded, slightly injuring two people.
As before, pamphlets were found in the name of a little-known hardline Hindu group.
Some militant pro-Hindu and pro-royal factions are campaigning violently against Nepal's shedding of its royal - and its officially Hindu - status.