Nepal's interim government has declared a ceasefire in the 10-year conflict with Maoist insurgents.
Announcing the move, Deputy PM Khadga Prasad Oli said all terrorism charges against the rebels would be dropped.
The indefinite ceasefire follows a three-month truce called by the rebels last week - after King Gyanendra ended direct rule and restored parliament.
The king's move was prompted by weeks of strikes and protests which brought thousands of people onto the streets.
Politicians have promised to work with the Maoists as a prelude to bringing them into government.
"The government decided to declare a ceasefire," Mr Oli said. "We are urging the Maoists to come forward for peace talks."
"All terrorist charges against the Maoists have been removed"
The government also announced that it was annulling controversial municipal elections held by the king in February and sacking local officials he appointed.
In addition, it said it was awarding compensation of about $14,000 to families of those killed by security forces during the recent demonstrations, and was appointing a judicial commission to inquire into the deaths.
The BBC's Charles Haviland in Kathmandu says if the truce holds on both sides, Nepalis could enjoy their first sustained period of peace for three years.
The last mutual ceasefire ended after seven months in 2003 when peace talks broke down and our correspondent says there will still be problems of trust now.
US list
Earlier US Assistant Secretary of State Richard Boucher said Washington was not yet ready to remove the rebels from its list of terrorist groups.
"We can't forget the issue of the Maoists in Nepal, what they have done in the villages, what they continue to do in the villages," he said.
"They killed people, they extorted money. So our removing them from the terrorist list is not going to happen until they stop that behaviour."
But rebel leader Prachanda has made clear that his fighters would disarm only if the army was reformed.
"If anybody is thinking of disarming the Maoists while keeping the 'royal' army as it is, then they are having a suicidal dream," he wrote earlier in a pro-rebel newspaper.
He said the new cabinet appointed on Tuesday was filled with "old faces" who had no "new vision".
Cross-roads
Senior opposition leader Girija Prasad Koirala took over as interim prime minister after King Gyanendra restored the country's parliament last week.
Parliament moved swiftly to back elections to a constituent assembly, a key rebel demand.
That body will be empowered to draw up a new constitution and could determine whether Nepal will remain a monarchy or turn into a republic.
The rebels are demanding an end to the monarchy.
More than 13,000 people have died in violence in Nepal since the rebels began their fight for a republic 10 years ago.
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