Nepal's former Maoist rebels have taken a surprise early lead in vote-counting after an historic election last week, the country's first in nine years, that is now almost certain to lead to the abolition of the world's last Hindu monarchy.

As counting continued last night, the Maoists looked set to win the largest number of seats, if not an outright majority, in the 601-seat constituent assembly, raising hopes for a radical shake-up of the dysfunctional Nepalese political elite.

The prospect also raises some international concerns, because the Maoists are still listed as terrorists by the United States and have threatened to tear up treaties with India and to abolish Britain's Gurkha Brigade.

The Maoists, who ended a bloody decade-long insurgency in 2006, had won 44 of the 81 seats declared so far and were winning by a similar proportion in many other constituencies, according to election officials.

The two parties that have long dominated Nepalese politics and were favourites, the Nepali Congress and the Communist UML, were trailing with 14 and 15 seats. Complete results are not expected until April 20 at the earliest as the election was a complex mix of direct and proportional systems.

The early figures have come as a shock to election observers, Western diplomats and political analysts, who had all predicted that the Maoists would come in third behind Congress and the UML. Many had voiced fears that the Maoists, who were blamed for the bulk of pre-election violence, would dispute the results if they did not do well.

“If you'd told me this was going to happen a month ago, I would have fainted,” Rhoderick Chalmers, of International Crisis Group, told The Times. “But it's clear now that an awful lot of people were fed up with the old politicians. There has to be a major upset for the Maoists not to emerge as the largest party in the assembly.”

Prachanda, the Maoist leader, reassured voters at the weekend that he had embraced democracy since signing a peace deal with the Government in 2006 after a popular uprising forced the King to renounce absolute power. “We urge everyone not to doubt our commitment to multiparty competition,” he said after winning his seat on Saturday.

If the Maoists emerge as the dominant force in the assembly, they will insist that it abide by a pre-election agreement to abolish the 240-year-old monarchy at its first meeting. They are also likely to demand a strong, executive presidency, occupied by Prachanda.

The US is now under pressure to remove the Maoists from its terrorist list, as demanded last week by the former President Jimmy Carter, who helped to observe the election. India is likely to review its policy towards the Maoists, whom it has long regarded with suspicion because of their alleged links to Maoist rebels in India.

British officials are waiting to see whether the Maoists will pursue their stated aim to abolish the Gurkhas, who have fought for Britain since 1817.

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