"During this period, our People's Liberation Army (PLA) will be in defensive positions," Prachanda said in a statement made available to Reuters.

"The PLA will not launch any offensive from its side."

"We believe our move will encourage all forces, within and outside Nepal, who want peace through a forward-moving political solution," the elusive Maoist chief said.

The Nepali army said it had heard about the rebel's truce but did not want to comment.

Nepal's mainstream political parties said in July they would hold talks with the rebels to discuss a plan to hold joint protests against Gyanendra's power grab, provided the Maoists stopped violence.

More than 12,500 people have been killed in the nine-year-old Maoist revolt aimed at toppling the world's only Hindu monarchy.

Gyanendra seized power by sacking the multi-party government and curbing civil rights. He justified his actions saying it was a vital step towards crushing the rebels.

Nepal's seven-party political alliance plans to hold pro-democracy protests later on Saturday.