Thousands of Nepali pro-democracy protesters have been celebrating through the night after King Gyanendra's announcement that he was reinstating the kingdom's parliament.

The king's climb-down came after nearly three weeks of often-violent mass protests and a general strike that has virtually crippled the country.

Leaders from the seven-party opposition alliance that has led the protests were due to meet on Tuesday morning to discuss their next moves. Officials have said they would most likely declare victory and call off further anti-monarchy protests.

A planned protest for later on Tuesday is now expected to become a victory parade.

Overnight protesters cheered, danced and hugged each other on the streets of the capital, Kathmandu and other towns.

"This victory is the people's victory, long live democracy," many chanted.

"The ball is now in the court of the seven political parties," Kumar Thapa, a 25-year-old milk vendor told the Associated Press.

In the capital itself, life slowly began to return to normal after days of curfew, protests and closures.

Many buses and taxis ran for the first time since April 6, and mobile phone connections, cut at the height of the protests on Saturday, were restored.

State of emergency

Nepal's parliament has been dissolved since 2002, and a multi-party government was suspended in February last year when Gyanendra declared a state of emergency and assumed absolute power himself.

In an announcement on national television late on Monday, the king said he was calling back the assembly.

"We, through this proclamation, reinstate the house of representatives which was dissolved on May 22, 2002," he said in the address, which aired at about 2330 local time.

The first session will be held on Friday, he said, adding the move was aimed at "protecting multi-party democracy and restoring peace".

Gyanendra had offered last week to hand over power to a prime minister nominated by the seven parties, but they said this was not enough.

Monday's address went much further in content and in tone and left many protesters surprised at the scale of the king's climb-down.

Victory

"For him to even acknowledge there was a people's movement, that really shocked me," Kunda Dixit, editor of the Nepali Time, told the Associated Press.

Arjun Narsingh K.C., a senior leader of Nepali Congress, the country's largest party, said the king's announcement represented "the victory of the people's movement."

The king's announcement did not make any explicit reference to the election of new constituent assembly, a key demand of protesters and the Maoist rebels.

The assembly would be tasked with writing a new constitution.

However, in his address on Monday night, Gyanendra said his proclamation was being made "according to the road map of the agitating political parties".

The United States welcomed the move but said Washington was looking for more concessions from the king.

"We believe that he should now hand power over to the parties and assume a ceremonial role in his country's governance," said Adam Ereli, spokesman for the State Department.

He also said that the country's Maoist rebels "must end their violent attacks and join a peaceful political process".

Since beginning their campaign almost 10 years ago, the Maoists have taken effective control of large swathes of the countryside in a rebellion that has left at least 13,000 people dead.

There has yet to be any formal comment from Maoist leaders on the king's announcement.

PHOTO CAPTION

Opposition party supporters shout slogans during a rally at Ratna Park in Katmandu, Nepal, Tuesday April 25, 2006. (AP)