Authorities say suspected rebels gunned down a politician who had announced his decision to run in municipal elections next month.
Police say Bijay Lal Das, a member of a party that supports King Gyanendra, was killed Sunday in the southeastern town of Janakpur.
The rebels have vowed to disrupt the polls, which King Gyanendra has described as part of his road map to democracy.
The king seized power a year ago, saying political parties had failed to put down a Maoist revolt wracking the country.
But violence has intensified in recent weeks. Police say at least 25 rebels and security personnel were killed in a weekend clash in western Nepal.
Besides grappling with the Maoist insurgency, the royalist government is also confronting rising turmoil in the capital Kathmandu. An alliance of seven political parties has announced a nationwide strike on Thursday and called for more protests against the king.
Like the rebels, the political parties oppose the king's plan to hold municipal polls, saying they are undemocratic.
Sukh Deo Muni, a specialist in South Asia politics, says the situation in Nepal is deteriorating.
"It is going to go more chaotic, largely because of the obstinacy of the king. The only way out is that is he would call back the elections and sit back with the political parties to talk. Otherwise the political parties and the Maoists would not let elections take place … and there would be clashes, there would be disturbances, there would be violence," he said.
Last week, authorities banned anti-monarchy rallies, but on Saturday spontaneous pro-democracy protests erupted in the streets of Kathmandu. Police arrested hundreds of activists. Riot police continue to be deployed in the city to prevent protests.
However, authorities have lifted the house arrest of some senior opposition leaders. They were among dozens of politicians and activists detained as part of a clampdown to stop anti-monarchy rallies.
The international community has urged King Gyanendra to open a dialogue with political parties and the rebels to end the turmoil gripping the country. So far he has not done so.