Nepal was preparing Monday for months of political instability after the government failed to meet a midnight deadline to agree a new post-war constitution, forcing fresh elections.
The country's parliament, elected in 2008 to write the statute after a decade of civil war, will be disbanded ahead of November elections after failing to agree on the nation's new federal structure.
"Though we were unable to promulgate the constitution, we have decided to seek a mandate through elections for a new Constituent Assembly on November 22," Maoist Premier Baburam Bhattarai said in a televised address.
Bhattarai, who leads a national unity government made up of the country's four major parties, vowed to stay in office until the vote, saying executive power would remain with his government.
The speech sparked anger within the coalition, with the Nepali Congress, Unified Marxist Leninist party and United Democratic Madhesi Front arguing elections would be unconstitutional and demanding the premier's resignation.
The constitution was intended to create a new secular, democratic republic following the abolition of Nepal's centuries-old Hindu monarchy after the Maoist rebels gave up arms and won the 2008 elections.
It was also meant to bring stability to the impoverished Himalayan nation and unite its more than 100 ethnic minorities in a country traumatised by the deaths of 16,000 people in the 1996-2006 civil war.
But while the Maoists, who dominate the assembly, want the creation of up to 14 states named after ethnic groups, their rivals say dividing Nepal along ethnic lines will fuel unrest.
Despite four extensions of the assembly's mandate, it was unable to complete the far-reaching document, and the Supreme Court ruled that any further extensions would be illegal.
Analysts had warned that failure to promulgate the constitution would lead to a "power vacuum", with a caretaker government and president having no mandate, and no chamber in place to pass laws and rubber-stamp decisions.
"The human cost of an election is likely to be very high. Even if the election takes place, it will be very violent," said political analyst Tilak Pathak.
"Even the current government's legitimacy will be questioned because after the dissolution of the Constituent Assembly, the government will be a caretaker one."
The widespread hope in Nepal that followed the end of the civil war and the abolition of the unpopular monarchy has been replaced by a growing sense of anger and frustration.
Political instability has stifled economic growth, forcing many people to seek work overseas, and thousands of Nepalese have taken to the streets in recent weeks to protest at the lack of progress in their country.