Shashi Shekhar Shrestha, an administrator of Siraha district, said: "A daytime curfew was imposed on Golbazar town after we learnt Maoists planned to disrupt a Madeshi programme."
The Madeshi forum, which represents the ethnic group who live in a fertile strip of land known as the Terai along Nepal's border with India, is pushing for greater autonomy.
Paul Allen, Al Jazeera's correspondent in Nepal, said: "[The] Maosist activists died attending a rally, and their funerals in Kathmandu [on Friday] turned into another one."
The activists were killed on Wednesday after clashes broke out in the town of Gaur, 150km south of Nepal's capital.
The Madeshi forum was trying to hold its own rally in the same location.
Allen said: "Twenty-eight people died and more than 30 were injured in the fight that followed, fuelling concern that Nepal's recent peace is starting to look shaky again."
Former Maoist separatists and the government signed a peace deal last year, intended to end a 10 year conflict that claimed 13,000 lives.
The United States warned that Nepal's fragile peace process could be "imperilled" unless the government cracks down on violence besetting the Terai region.
The United States condemned Wednesday's killings and called on the government to arrest and prosecute all the perpetrators, regardless of their political or ethnic affiliation.
On Friday, Maoist activists placed the bloodied corpses of their comrades on display in the capital and threatened retaliation for their deaths.
|Madeshis have staged a series of protests in|
the south since January [Al Jazeera]
Addressing thousands of supporters, Baburam Bhattarai, the Maoist deputy leader, said: "The leader of this group should be arrested and a case filed against him in court. If the government refuses to do so, we will be forced to retaliate and the government will be solely responsible.
Bhattarai also accused the Madeshi Forum of using "war-like tactics".
More gatherings were planned in Nepal's south over the coming days.
But the violence and rhetoric have prompted the government to enforce a four day ban on rallies in the area to keep the two sides apart.
Six Madeshis were arrested on Friday "during raids" in the region, on suspicion of being involved in the clashes, Ram Kumar Khanal, the superintendent of police, told AFP by telephone from Rautahat district, 90km south of Kathmandu.
The police officer did not specify exactly what charges suspects might face.
Elections in Nepal are due in June for the first time in eight years, but the poll may be at risk if the Madeshi Forum's demands are ignored.
Madeshis have staged a series of deadly protests since January in a bid to win greater representation in national politics.