Nepali security opened fire on tens of thousands of protesters marching toward the royal palace Saturday in defiance of a curfew, as opposition leaders rejected the king's proposals for restoring democracy.

Police fired rubber bullets and live ammunition and beat people with bamboo batons.Red Cross officials said dozens of people were badly hurt in the clash, which occurred about 3 miles from the royal palace in the heart of this Himalayan nation.

"Security forces opened fire on the crowd without warning, wounding many of us," said Ganesh Shrestha, who was shot in the arm.

At nearby Norvic Hospital, injured people calling for treatment crowded the hallways. Umesh Dhakal, of the Nepalese Red Cross Society, said 243 people were injured, with 39 requiring hospitalization. Many were hurt in stampedes as they tried to flee.

The violence erupted after an alliance of seven opposition parties rejected King Gyanendra's offer to allow them to nominate a prime minister and form a government.

"We will not accept," Madhav Kumar Nepal, general secretary of Communist Party of Nepal, told cheering supporters in Katmandu. "We will continue the protests."

The crowd chanted, "We are here to support you. Don't get weak in the knees. Don't ditch the people."

The opposition leaders also met with European diplomats, who urged them to consider the king's offer.

"The parties don't think he (king) has done enough, but we think it is basis on which we can build and move forward," British Ambassador Keith George Bloomfield said after the meeting.

Paule Mustonen, Charge d'Affaires of Finnish embassy, added, "We have explained to them that this would lead to a process that could help end the violence and lead to the beginning of democracy."

Protests died down quickly in the afternoon when it started to rain and hail. By early evening, most demonstrators had retreated to narrow alleys or gone home.

Authorities later cut mobile phone services in Katmandu, a telecommunications official said, speaking on condition of anonymity because of the sensitivity of the situation. Protest organizers have repeatedly used mobile phones and text messages to rally demonstrators during more than two weeks of protests.

About 50,000 people also protested in the resort town of Pokhara, 125 miles west of Katmandu, urging the opposition parties not to give in to the king's offer.

The king addressed the nation Friday as tens of thousands flooded Katmandu's streets for the second straight day. Gyanendra insisted he was acting on behalf of the nation his family has ruled since the 18th century.

"Executive power ... shall, from this day, be returned to the people," he said in the announcement broadcast on state television and radio.

On Saturday, the government freed two senior Communist Party leaders arrested the day before, and police drove them to the party office in time for a meeting.

The leaders, Jhala Nath Khanal and Bamdev Gautam, have been important conduits in negotiations between the seven opposition parties and Maoist insurgents, which have formed an alliance to protest the king's seizure of power last year.

In a country where kings recently were revered as godlike, Gyanendra is deeply unpopular, isolated in a collection of palaces; he has lost control of much of the rural areas to the Maoist rebellion, which has left nearly 13,000 people dead in its quest to create a communist Nepal.

Observers fear the country could, at its worst, descend into chaos, creating a power vacuum into which the Maoists, with their long history of violence, could step in.

In addition, many demonstrators are increasingly demanding that he give up all his power -- something the king is clearly loathe to do.

On Friday, U.S. Secretary of State Condoleezza Rice welcomed Gyanendra's promise to allow political parties to form a government, calling it "extremely important."

U.N. Secretary-General Kofi Annan also applauded the decision.

Opposition leaders, however, saw little in the speech to resolve the crisis, which began when the king seized power in February 2005, saying he needed to crush the Maoist insurgency.

They noted the king fell short of a key opposition demand -- the return of parliament and creation of a special assembly to write a constitution.

Most opposition leaders want a constitution that would make the king a ceremonial figure or eliminate the monarchy entirely.

But they saw other problems too: Under the new plan, the king would retain an undefined political role in a constitutional monarchy and apparently keep control of the military.

Nepal's crisis has escalated since a general strike called by the parties and the Maoists began two weeks ago. Protesters have filled the streets daily, leaving the country paralyzed, stores emptied of goods and the situation dangerously volatile. Security forces firing at protesters have killed at least 14, and wounded many more.