Nepal was set for historic change Wednesday with a new assembly dominated by former Maoist rebels poised to sweep away the Himalayan kingdom's 240-year-old monarchy and declare a republic.

The key session, however, was being held up for several hours amid wrangling between the former rebels and mainstream political parties over who should be the impoverished nation's first president, officials said.

Tensions were also rising in the capital, with police using tear gas to disperse protesters demanding that unpopular King Gyanendra be given the boot as scheduled, an AFP reporter at the scene said.

In spite of a ban on gatherings outside the complex where the new constitutional body is set to meet, thousands of people thronged the area to celebrate Nepal's first "republic day."

"We are here to put pressure on them to announce a republic quickly," said Mohan Ghising, 48, a Maoist political worker who was part of group waving large red flags emblazoned with a hammer-and-sickle. "We don't want them to delay."

"This is a golden day for Nepal and Nepalese. It's the end of an era and the start of a new era," said Sagar, the leader of the Maoists' Young Communist League, which has mobilised thousands of its supporters.

But last-minute jockeying for places in Nepal's new political landscape was holding up the historic moment, originally scheduled to take place in the morning.

"The meeting will be further delayed until they reach an agreement," Ananta, deputy commander of the Maoist People's Liberation Army, told AFP.

Sources close to the talks said the country's elderly prime minister, the mainstream politician Girija Prasad Koirala, wanted to be declared president but that the Maoists were objecting.

The constitutional assembly's first meeting will be the culmination of a 2006 peace deal that brought the Maoists out of the hills and jungles of one of the world's poorest countries and into the mainstream.

The Maoists have told Gyanendra and his son Crown Prince Paras -- loathed for his alleged playboy lifestyle -- to bow out gracefully or else face "strong punishment."

Gyanendra was crowned after the 2001 slaying of his popular brother Birendra and most of the royal family by a drink-and-drug-fuelled crown prince who later killed himself.

Maoist spokesman Krishna Bahadur Mahara said the king would have a deadline of seven to 15 days to vacate the palace. But tensions are high, with police blaming die-hard royalists for a string of small bomb attacks this week.

Although seen by loyalists as the reincarnation of a Hindu god, Gyanendra never managed to win much support from the public, having been falsely seen by many people as somehow involved in the palace killings.

The king's status was further damaged by his ill-fated decision to seize absolute power to fight the Maoist rebellion.

He still enjoys some support from Hindu hardliners and powerful elements in the armed forces and ruling elite, but most observers say republican sentiment in the country is now overwhelming.

The former Maoist rebels, who fought for 10 years to remove the king and create a republic, emerged as surprise winners in constituent assembly elections last month, taking a third of the body's 601 seats.

The first session of the new constitutional assembly is expected to start with the prime minister proposing a republic, followed by a vote.

"It will take quite some time. After the participating members have signed, we will have to count the votes," Manahor Prasad Bhattarai, the acting general secretary of the constituent assembly, told AFP.

The official end of the monarchy will be announced once a simple majority in favour of abolition has been confirmed, Bhattarai said