Police in Nepal's capital arrested 12 rights activists and quashed a rally to protest the king's emergency rule Thursday, while rebels in the southwest killed five policemen and freed comrades from a jail during a raid on a town.

Police in Katmandu detained the activists as they arrived for a rally by human rights group Peace Society Nepa (search)l, hustling them into police vans and slapping a security cordon around the planned rally site to block other activists from gathering.

It was one of the first attempts to hold such a rally since Feb. 1, when King Gyanendra (search) sacked an interim government, imposed emergency rule and suspended civil liberties, saying the moves were needed to control the intensifying Maoist insurgency.

Security forces have arrested dozens of politicians and activists, drawing strong protests from foreign capitals including Washington, which urged Nepal to return to the "democratic path."

Earlier Thursday, Nepal announced the release from house arrest of seven top political leaders, including two former prime ministers, but political parties say scores more of their members remain under arrest.

In southwestern Nepal, hundreds of Maoists attacked four police stations, a jail and a local government office just after midnight in the town of Dhangadi, killing at least five policemen and injuring four others, state-run Radio Nepal reported.

During the skirmishes, at least 150 inmates escaped from the jail. Many of them were rebels who were arrested in recent months.

The rebels also tried to attack a local bank but soldiers prevented them from entering.

The army later retook control of the town, finding the body of one rebel, the report said. Dhangadi is about 600 kilometers (375 miles) southwest of Katmandu.

Nepal's rebels, who say they are inspired by the late Chinese revolutionary leader Mao Zedong (search), have been trying since 1996 to overthrow the government and establish a socialist state in a conflict that has claimed 10,500 lives.

Critics charge that the king's moves have thrown the country into chaos, refocused the security forces onto arresting dissidents, and undermined the king's stated goal of controlling the insurgency and restoring peace.

"With the king so openly heavy-handed, the state unraveling and the political parties in disarray, the Maoists now have less incentive to negotiate than ever," the Brussels-based International Crisis Group said in a statement.

Some Nepalis say they are hopeful that Gyanendra will restore stability and revive the Himalayan nation's vital tourist trade, which has been flagging because of the insurgency.

The seven politicians released Thursday included former prime ministers Krishna Prasad Bhattarai and Lokendra Bahadur Chand as well as other key members of Nepali political parties, state-run Radio Nepal said. The report gave no reason for the releases.

The U.S. ambassador had complained directly to the king this week that security forces had blocked the diplomat's attempts to visit detained political leaders, the U.S. State Department said.

"The United States is concerned about the welfare of Nepalese opposition, student and human rights activists and leaders detained under the state of emergency," State Department spokesman Kurtis A. Cooper said in Washington.