The Maoists said they had lifted the blockade on Kathmandu and major towns until parliament meets for the first time in four years on Friday, but they reiterated their demand for a new constitution and a review of the role of the monarchy.
A top Maoist leader, known by his nom de guerre Prachanda, said on Wednesday: "We have withdrawn our call for a blockade in response to an appeal from the Nepali Congress President Girija Prasad Koirala ... until the first meeting of the parliament.
"We want to make it clear that if the first meeting of the parliament does not take a positive decision on the declaration of an unconditional constituent assembly, we will be compelled to reimpose the blockade."
Koirala, 81, is set to become Nepal's next prime minister after King Gyanendra handed over power to the country's main political parties, in response to weeks of often bloody pro-democracy and anti-monarchy protests.
"If the first meeting of the parliament does not take a positive decision on the declaration of an unconditional constituent assembly, we will be compelled to reimpose the blockade"
The veteran politician, four times prime minister and leader of the biggest political party, had earlier appealed to the powerful Maoists to end their blockade.
"The constituent assembly is the main agenda of the new parliament," Koirala said in a statement on Wednesday.
Life slowly returned to normal in Kathmandu after weeks of protests and a victory celebration on Tuesday after King Gyanendra reconvened the dissolved parliament.
Streets were crowded with tourists and shoppers, and public transport was working on Wednesday.
"I am relieved, there is no trouble now, it is peaceful," said Raju Shahi, who had taken his taxi out of the garage for the first time in 17 days on Tuesday.
A protester, fired on by police during a demonstration last week in west Nepal, died of his wounds, taking the toll to at least 15 dead across the country from clashes between security forces and demonstrators.
Hundreds more were wounded.
Meanwhile, the authorities have released 320 political detainees who had been held in and around Kathmandu, police said.
"Among the released were political leaders, human rights activists, civil society members and protesters," a police official said on condition of anonymity.
Political parties said their priority would be to bring the Maoists back into the mainstream.
Nepalese protesters celebrated
King Gyanendra's climbdown
Arjun Narsingh KC, a senior Nepali Congress leader, said: "We must have a ceasefire, call the Maoists for talks and call elections for a constituent assembly.
"This is one of the first steps the new government must take."
Analysts said there were of pitfalls ahead.
The Maoist demand for an unconditional constituent assembly is generally interpreted to mean it should have the power to strip the king of his title and establish a republic.
But an assembly on those terms is not something the king would be happy with.
He could use the Supreme Court, dominated by royal appointees, to block such a measure.
It was also not clear whether the Maoists would agree to lay down their weapons before elections to the special assembly, something the parliament is expected to demand.
The Maoists began their armed uprising to win a republic in 1996 and more than 12,500 people have been killed.