A landmark proclamation, endorsed by a voice vote nearly three weeks after the multi-party government headed by G P Koirala came to power, also said that his 'Majesty's Government' would be called Nepal Government and the Royal Nepalese Army would be named the Nepalese Army.
Another important aspect of the proclamation is that the world's only Hindu Kingdom Nepal would turn into a secular state and the post of the Supreme Commander in Chief of the Army, which was held by the King till now, would be scrapped.
"The proclamation reflects the feelings of all the people," Koirala said in Parliament while presenting the resolution.
The Parliamentary approval to the proclamation was the most significant move since the the seven-party alliance assumed power last month after over two weeks of protests that forced King Gyanendra to give up his direct rule. A delay in voting on the proclamaton had triggered angry protests in the capital earlier this week.
The proclamation said the Chief of the Army Staff would be appointed by the Cabinet and a National Security Council would be established for the use, control and mobilisation of the Army. This provision has to be cleared within 30 days by a special committee to be formed by Parliament.
Under the new provisions, the 'Pratinidhisabha' or the House of Representatives would decide matters relating to the succession of the King as well as the budget and other facilities for the monarch.
Taxes would be levied on the King's private property and income and the question could be raised on the monarch's action in Parliament and courts, the proclamation said, adding the controversial Royal Council would be scrapped.
The House of Representatives established through the King's proclamation as per the power of the Popular Movement of the oppsoition parties is a body vested with the sovereign authority, it said.
The sovereign House of Representatives would enjoy all the powers, including the state authority of the people, until total democracy is established and absolute monarchy ended, the proclamation said.
It said the House would also decide about necessary procedures to move towards holding the Constituent Assembly election, which is also a key demand of Maoist rebels.
All but one provision of the proclamation relating to the establishment of the National Security Council for the control of the Army would come into immediate effect, Minister for Physical Planning and Works Gopalman Shrestha said.
He said the government would change its signboard to 'Nepal Government' from 'His Majesty's Government' from tomorrow.
According to another provision of the proclamation, the Prime Minister would summon and end Parliament sessions, which used to be done by the King in the past.
The Cabinet would make necessary arrangements for the Royal Palace security, the proclamation said.
The arrangements made for the appointment of civil servants would also be applicable to the Royal Palace staff, it said.
The provisions of the 1990 Constitution would be annulled if they contradicted this proclamation, it said.
CPN-UML General Secretary Madhav Kumar Nepal and Nepali Congress (Democratic) President Sher Bahadur Deuba extended full support to the proclamation. Other leaders also extended full support to it.