Tightening his grip on power, Gyanendra sacked the government in February - blaming it for failing to tackle a Maoist revolt.
He assumed direct charge, setting aside multi-party democracy that was introduced in 1990 and suspended civil liberties including press freedom.
Political wrangling and the insurgency in landlocked Nepal, which is sandwiched between giants India and China, have raised concern about its stability and fears foreign fighters could take advantage of the chaos and find a hideout.
Stepping up pressure on the king, the US, Britain and France said on Monday they were recalling their ambassadors and Washington demanded the restoration of civil rights and liberties in the kingdom.
"The King needs to restore and protect civil and human rights; he needs to release those detained under the state of emergency, and move quickly towards the restoration of civil liberties and multiparty democratic institutions," US State Department spokesman Richard Boucher said.
India is also concerned that Maoist success in Nepal could embolden its own left-wing rebels who operate in a "red corridor" stretching from the state of Bihar which borders Nepal to the southern states of Andhra Pradesh and Tamil Nadu.
"The King needs to restore and protect civil and human rights; he needs to release those detained under the state of emergency, and move quickly towards the restoration of civil liberties and multiparty democratic institutions"
Richard Boucher, US State Department spokesman
Indian Foreign Minister Natwar Singh told Nepal's ambassador in New Delhi India wanted Nepal to release immediately political leaders, journalists and human right activists detained by police and the army.
Singh also asked Nepal to withdraw curbs on the press and bring back multi-party democracy in the Hindu kingdom, his ministry said in a statement.
In Kathmandu, Radio Nepal said Tulsi Giri and Kirti Nidhi Bista, who were both prime ministers in the 1960s and 1970s, during absolute monarchy, were named vice chairmen of a council of ministers - already packed with royalists - headed by King Gyanendra.
Nepali authorities freed 13 people, including former royalist prime minister Surya Bahadur Thapa, who were among dozens taken into custody or placed under house arrest after
Gyanendra took power.
Most of the others released were human rights activists who tried to stage an anti-king protest last week in the centre of Kathmandu.
But the chiefs of mainstream political parties, who analysts say could organise protests against the king, still remain under house arrest or in police custody.
King Gyanendra assumed power
after sacking the government
In the wake of the crackdown, King Gyanendra's government has stepped up operations against the Maoist rebels who want to overthrow the monarchy. More than 11,000 people have been killed in the insurgency since it erupted in 1996.
The Maoists, who hold sway over large parts of the countryside, have rejected talks with the king, and instead launched a nationwide blockade over the weekend.
Vegetable prices shot up in Kathmandu on Monday as the transport shutdown disrupted supplies to the hill-ringed capital.
Trucks, which bring in supplies from southern Nepal and the plains of India, have largely stayed off the roads since the rebel blockade started.
"We have not received any supplies since the strike started," said Rajendra Saha, a shopkeeper in Kathmandu's biggest vegetable market. "It is too expensive to bring in anything. The truck drivers are charging very high rates."
Cucumbers, which were brought from India, sold at 100 rupees ($1.4) a kilogramme, up from 25 rupees before the strike began, Saha said. "Even at this level, there is very little left."
In western Nepal, vehicles were off the roads while shops, food stalls, schools and cinemas were shut because of a strike called by the Maoists.
"We have witnessed bandhs (strikes) in the past, but never before have we seen such an impact which has led to this undeclared curfew-like situation," a journalist, who did not want to be identified, said in Nepalgunj, a town bordering India.