"The president has called the parties to form a national unity government as per the interim constitution. They have been given a deadline until August 21," Baman Prasad Neupane, the president's secretary, told AFP.
Prime Minister Jhalanath Khanal, chairman of Unified Marxist Leninist party, submitted his resignation to President Ram Baran Yadav on Sunday, blaming a political deadlock over the country's peace process and constitution-drafting.
Khanal was elected in February after a damaging seven-month leadership vacuum as the Himalayan nation's deadlocked political parties failed to agree on a consensus candidate.
None of the political parties enjoy a majority in the parliament, which has paralysed decision-making in the legislature.
The centrist Nepali Congress (NC) party, the second largest in the parliament, and the Maoists, the biggest party, have both staked their claim to lead the next administration.
The Maoists have named Baburam Bhattarai, the party's deputy chairman, as its prime ministerial candidate, while the NC was divided about who to field.
Nepal emerged from 10 years of civil war in 2006 but lawmakers elected to write a new constitution have failed to reach a consensus on the new charter amid a series of shaky coalition administrations.
Observers say the political inertia threatens post-war reform and development in the country, where many were optimistic that historic grievances and inequalities would be addressed after the bloody civil war ended.
Copyright AFP (Agence France-Presse), 2011