(Adds U.S. reaction paras 18-19) By Gopal Sharma KATHMANDU, Jan 16 (Reuters) - Nepalis woke to an unexpected public holiday on Tuesday as their political leaders and senior Maoists hailed the birth of a new nation after the former rebels, who waged war for a decade, took their seats in parliament. The Maoists walked into an interim legislature late on Monday, hours after the previous parliament proclaimed a temporary constitution paving the way for the former guerrillas to rub shoulders with mainstream politicians. "This is the most significant and eventful day in the history of Nepal," said Krishna Bahadur Mahara, chief Maoist negotiator and leader of the 83-member strong Maoist team in parliament, the second biggest group. The government declared Tuesday a holiday in the impoverished Himalayan nation to mark the Maoists joining the legislature. Some Nepalis were stunned by the pace of change. "Just last year, they were underground and fighting from the jungles," said Keshav Bhandari, a 35-year-old Kathmandu school teacher. "They are now in parliament. It is incredible." The government said permanent peace had dawned. "(The) Maoists' entry into the legislature is highly significant because the conflict is over and a lasting peace will be established," said Gopal Man Shrestha, a government minister. The Maoists will be included in an interim government with the ruling seven-party alliance that will organise elections for a special assembly tasked to draft a permanent constitution and decide the future of the monarchy that they want abolished. "The Nepali people will now be able to exercise their sovereign rights to elect the constituent assembly and decide their own future," Mahara said. The war began in 1996 in a bid to topple the king and killed more than 13,000 people until a peace deal sealed last year silenced the guns and brought the Maoists from their jungle hideouts to the centre of power in less than a year. The Nepali media hailed the rapid change. "Interim constitution proclaimed, Nepal enters a new era," read a banner headline in the Annapurna Post daily. CAUTION, HOPES But other Nepalis, who lived through a cycle of killings, abductions and fear, expressed guarded optimism. "I think the Maoists will change their ways now. They can't hold guns and sit in parliament at the same time," said taxi driver Bharat Thapa, 42. "But we will have to wait and see. It is politics and you can't (be sure of) anything in politics." Analysts said the Maoists would find the transformation from guerrillas to politicians difficult, but were also hopeful. "It will be a difficult change for them to get used to the politics of compromise," said Kunda Dixit, editor of the Nepali Times. "I think it is very hopeful for the country." Key donor United States, which has kept the Maoists on its list of terrorist groups, said it hoped the new constitution would move Nepal toward "full-fledged and lasting democracy". "We also urge the Maoists to use the opportunity of joining the interim legislature to finally abandon the tactics of violence, intimidation and extortion inflicted on the Nepali people," the U.S. embassy added in a statement. Influential southern neighbour India hailed the "significant milestones in Nepal's progress towards a new political era of peace and economic development". Nepal's other powerful neighbour, China, called for the peace momentum to be stepped up. Before joining the interim cabinet, for which no date has been set, the Maoists are to store their arms in containers under the supervision of the United Nations, which says 35 monitors were expected to begin arms registration this week.
