Nepal's government officially converted the main royal palace in Kathmandu into a public museum on Sunday, a few days after the deposed king moved out to begin life as a civilian.

Prime Minister Girija Prasad Koirala hoisted the national flag and unveiled a sign that read Narayanhiti Palace Museum at a ceremony marking what he called a "historic and unprecedented event."Nepal's Prime Minister Girija Prasad Koirala, centre, attends a ceremony marking the conversion of Kathmandu's main royal palace into a public museum. (Binod Joshi/Associated Press)

"The republic has been established," Koirala said. "The king helped the process by understanding the desire and expectation of the people by voluntarily moving out to live an exile-like life.

"This is an historic event, and without any bloodshed the transformation took place, which has stunned the world," he added.

The Narayanhiti Royal Palace was home to former king Gyanendra Bikram Shah, whose family has ruled Nepal since 1769.

Gyanendra assumed the throne when most of his close family were massacred on June 1, 2001 by the heir to the throne at the time, prince Dipendra. The prince was later found dead of an apparently self-inflicted gunshot wound in the palace grounds.

King Gyanendra seized power from the civilian government in 2005, saying its leaders had failed in the fight against the Maoist insurgency. A year later, massive protests forced him to restore democracy.

End of monarchy

Nepal outlawed the monarchy and declared a republic last month after elections in which the country's former communist rebels won the most seats in a special assembly charged with rewriting the constitution.

The elected Constituent Assembly gave former king Gyanendra, 60, two weeks to move of the palace and decided the palace would be converted to a museum and opened to the public.

It was not clear when the palace would actually be opened to the public.

The former king and queen Komal moved out of their residence on June 11 to the Nagarjuna palace, once the dynasty's summer retreat, eight kilometres northwest of Kathmandu.

Despite losing his seven palaces and $3.1-million US annual allowance, Gyanendra is still reported to be one of the country's richest men.

Before assuming the throne, he was known as a tough businessman with interests in tourism, tea and tobacco. He also inherited much of his family's wealth after the palace massacre.

With files from the Associated Press