Army spokesman Brigadier General Dipak Gurung said: "So far the security forces have recovered the bodies of at least 70 Maoists killed in the clash."
The rebels are said to have carried away others of their dead from the site of the clash, at Ganeshpur in Bardiya district, 500km southwest of Kathmandu, on Tuesday.
The battle erupted late on Monday, he added.
Another officer, Colonel Yagya Rajauria of the mid-western army division, said the situation in the area was now under control.
"However, we are very cautious," Rajauria added. "The Maoists started firing at security force personnel patrolling the area but another army team trapped them from behind so they suffered heavy casualties.
"It was a fierce encounter which lasted several hours."
Nepalese army says the battle
lasted several hours
There has been no immediate independent confirmation of rebel casualties.
The reported death toll is the highest of any clash since King Gyanendra a month ago seized absolute power in the Himalayan outpost and declared emergency rule.
Soon after his power grab he offered to hold unconditional talks with the Maoists, who have been fighting to overthrow the monarchy since 1996 at a cost of some 11,000 lives.
The Maoists, who branded the king a "betrayer" for his February takeover, have not responded to his call and instead staged a two-week transport blockade which ended at the weekend.
The blockade, which the Maoists said was aimed at getting the king to reverse his seizure of power, reduced transport to a trickle and sent food prices soaring.
Gurung said last month that if the rebels rejected the king's offer of talks they faced a series of offensive operations by the military.
"We have to force the Maoists to come to the negotiating table, we are looking for them. Wherever they are we are going to launch offensive operations," he said. "We have to make them weak."