Nepal will form a new interim government that will include communist rebels, who have waged a decade-long insurgency that has killed 13,000 people in this Himalayan nation, the rebel leader said Friday after meeting with the prime minister.

The interim government will be formed within a month, rebel leader Prachanda told reporters, announcing an agreement between the Maoists and the country's nascent democratic government.

"This is a historic decision and will move the country in a new direction," he said after a day-long meeting.

Prachanda and a deputy were escorted into the official residence of Prime Minister Girija Prasad Koirala for the meeting. Soon after, the heads of all seven political parties in the ruling alliance joined them.

Dozens of townspeople also gathered near the home, hoping for a glimpse of the communist rebel leader, a farmer's son and one-time school teacher. It was the first time Prachanda, whose real name is Pushpa Kamal Dahal, had met the country's top leadership since the insurgency began in 1996. For years, he was seldom seen at all, appearing only occasionally in remote villages controlled by the rebels.

The nation's new government took office after King Gyanendra agreed to relinquish control in April following weeks of anti-monarchy protests and a general strike. Gyanendra fired the prime minister in February 2005, citing a need to clamp down on corruption and stamp out the insurgency.

The unrest was organized largely by the politicians now in power and backed by the rebels — a bond that smoothed the way for the peace dialogue.

The new government has released hundreds of rebels from jail, dropped terrorism charges against them and agreed to a cease-fire. It also has agreed to rewrite the constitution, a key rebel demand that crippled peace talks in 2001 and 2003.