Protesters in the capital burnt tyres, blocked traffic and shouted slogans on Saturday demanding that the government scrap the price rises of up to 25 per cent. The increases were introduced in an attempt to save the state-owned Nepal Oil Corporation from bankruptcy.
Just east of the capital, lorry drivers parked their vehicles in the middle of a road and blocked it.
The government raised the price of petrol, diesel, kerosene and cooking gas late on Friday to offset the impact of higher global oil prices on the state company, which sells fuel at subsidised prices.
Hridayesh Tripathi, the commerce ministry, said: "We had to take the harsh decision to save the Nepal Oil Corp from going bankrupt.
"The NOC has been suffering losses of 830 million rupees [$11.17 million] a month due to international petroleum product prices.
"Even with the increases, it will still face losses of around $2.9 million a month."
The NOC, which holds a monopoly on the import and distribution of petroleum products is $161.16 million in debt, mostly to its sole supplier.
"The price hike was necessary as there was a danger NOC might not be able to continue oil supplies unless it cleared its dues," he said.
The government increased petrol prices by 25 per cent to $1.13 a litre. Kerosene was raised by 23 per cent, diesel by 11 per cent and cooking gas by 11 per cent.