Details were sketchy about the overnight attack at Chautara, about 120km northeast of Kathmandu, but officials reached at neighbouring districts confirmed the attack.
The attackers knocked down the telecommunication tower around midnight cutting off all communications. The attack began late on Sunday night but fighting continued until early Monday.
The rebels attacked the army base, police post, the district administration office and the local jail, the official said on condition of anonymity because he was not authorised speak to the media.
An army helicopter that headed to the mountainous area after the attack was forced to return to Katmandu because of bad weather overnight.
The area is known to have strong presence of the Maoist movement.
King Gyanendra slapped a fresh curfew on the capital as the opposition on Sunday vowed to keep up the pressure to end his control over Nepal.
State television announced the latest 11-hour curfew and mobile phone services remained cut.
But an alliance of seven opposition parties said there would be more mass demonstrations like the one on Saturday where 300,000 people marched to the heavily guarded city centre and near Gyanendra's pink-tinged palace.
The opposition says its general
strike will continue
"There is no way we can join the government and our general strike and peaceful protest will continue," the parties said in a statement, snubbing the king's offer to let the alliance select a prime minister.
In a televised address late on Friday, Gyanendra also promised to return power to the people after two weeks of daily marches against his absolute rule.
His conciliatory speech earned a qualified welcome from the international community, which called it a step in the right direction, but was flatly rejected by Nepal's opposition.
The opposition parties say the king must recall parliament, which he suspended in 2002, and agree to a constituent assembly to review the constitution, including the role of the monarchy that now has control of the armed forces.
A heavier than usual contingent of soldiers were posted every few hundred metres around the royal palace on Sunday.
The streets were virtually deserted save for a small group of bemused tourists.
The current crisis was sparked by Gyanendra's decision to sack the government on February 1 last year, saying it was corrupt and had failed to stem the Maoist revolt.