Home Ministry spokesman Daman Prasad Neupane said they were freed from jails in nine different cities and towns across this Himalayan nation.
The release follows a government announcement a day earlier that anyone jailed under a tough anti-terrorism law imposed by the previous government of King Gyanendra would be freed.
Among them were 61 rebels freed from the Nakhkhu jail on the southern edge of the capital, Katmandu.
"We want a democratic republic state. Make the peace talks successful," chanted the inmates at the prison just before their release.
Relatives and supporters who waited outside smeared the inmates with red powder, used to mark joyous occasions in Nepal, and offered flower garlands as soon as they walked out.
They raised clenched fists to salute fellow rebels and pledged to continue to support the Maoist leadership.
"Today marks a victory for us. We are stepping into a free Nepal," said Binda Yadav, in prison for last 17 months.
The remaining jailed rebels would also be freed once certain legal technicalities are completed, he said. Courts must issue individual orders for the release of each rebel. Some 160 rebels remain in jail.
The new government reached a cease-fire with the rebel leaders, began peace talks last month and freed hundreds of Maoists and supporters who had been held on lesser charges. But many remained in jail on charges including murder, kidnappings and crimes against the state under the anti-terrorism laws.
Weeks of street protests by the alliance of seven major political parties culminated in April in forcing Gyanendra to give up power, reinstate Parliament and appoint a new prime minister.
Since then, the new government and the rebels have declared a cease-fire and have been holding peace negotiations to end the conflict that has killed more than 13,000 people.
The government announcement follows a meeting between Home Minister Krishna Sitaula, and rebel leader Prachanda and his deputy Baburam Bhattarai at a remote mountain village Sunday.
Officials said the meeting cleared up doubts and confusion obstructing the peace talks. The two sides have been at odds since the talks began between the government and rebel negotiators last month — the first since they declared a cease-fire.