The former rebels hold five portfolios in a cabinet tasked with steering the impoverished Himalayan nation into new elections on June 20 -- which will lead to a decision whether the country keeps its monarchy.

"It's a historic day for Nepal," Maoist leader Prachanda, whose name means "the fierce one," told reporters.

"A new process of making a new Nepal has begun now and our responsibility has increased," he said, after the new ministers read out an oath in parliament to be "committed and responsible for the sovereignty of the nation and the people."

The rebels, who have never held government posts before, signed a peace deal with the country's mainstream parties in November in an agreement that formally ended a civil war, which claimed at least 13,000 lives.

Under the deal on the new cabinet, veteran Prime Minister Girija Prasad Koirala -- the architect of the peace accord and leader of the Nepali Congress party -- retains his position as premier.

The Maoists will head the ministries of information, local development, planning and works, forestry, and women and children, but their leader Prachanda and his deputy Baburam Bhattarai will not serve in government.

The positions will place the former rebels in direct contact with key international donors and will leave them under pressure to show they can tackle a raft of serious economic and social problems

The United States, however, still has the group on its list of foreign "terrorist" organisations and immediately warned the one-time jungle and mountain insurgents.

"As a partner in the interim government, the Maoists must now be held fully accountable for their actions," a statement from the US embassy said.

"They must meet their commitments and at last join the mainstream as a non-violent political party."

The admission of the Maoists in a new government comes after the former rebels registered their weapons and fighters with the United Nations.

But the Maoists continue to face accusations of mafia-like practices such as beatings, extortion and kidnappings.

Prachanda, however, vowed his group would work to hold new elections "in a free and fearless environment."

The polls, scheduled for June 20, will elect a body tasked with rewriting Nepal's constitution that includes deciding the future of the country's embattled 238-year-old monarchy.

The Maoists are pushing for the country, one of the world's poorest, to be declared a republic.

King Gyanendra, seen by supporters as a Hindu deity, was forced to relinquish direct rule last year after months of mass protests organised by an alliance of the political parties and the Maoists.