Details of the fighting in Yadukuwa, about 300km east of the capital Kathmandu, were still awaited on Monday after telephones had been cut.

The number of rebel casualties in the attack was not immediately known.

Aiming to replace the Himalayan kingdom's constitutional monarchy with a communist republic, the Maoists have been battling government forces since 1996.

The rebels have stepped up their attacks on government installations and security posts in recent months after they walked out of peace talks last August.

The Maoists are in control in large tracts of the kingdom with Kathmandu failing to enforce its authority. 

The conflict has claimed more than 9000 lives so far.