The Maoists declared a three-month ceasefire in April, after weeks of street protests forced King Gyanendra to cede power to a multi-party government.

That ceasefire was extended by another three months in July.

The multi-party government and Maoists began talks in May aimed at ending a decade-old conflict in which more than 13,000 people have died.

But peace talks have slowed due to differences over the future of the monarchy and the management of rebel arms.

Krishna Bahadur Mahara, a Maoist spokesman, speaking on Sunday, said: "There is no question of breaking it now. We'll extend it. A formal announcement will be made later today.

"Our talks are going on positively. If there is a consensus with the government, we are in favour of signing a formal ceasefire agreement.

"For the present, the existing truce will be extended."

Power sharing

Mahara's comments came hours after rebel chief Prachanda had an informal meeting with Girija Prasad Koirala, the prime minister, to try to narrow differences before the rebels join an interim government as part of a power-sharing pact.

Under the deal, the interim government will supervise elections for an assembly that will decide the fate of Nepal's monarchy.

The Maoists have been fighting to set up a communist republic since 1996 but now say they will honour the outcome of elections.