Nepal's governing parties and Maoist rebels met on Tuesday in a fresh attempt to overcome crucial differences, including the role of the monarchy, blocking efforts to hammer out a peace deal.
The two sides, who have observed a cease-fire for the past six months, met informally Monday for six hours, but postponed the formal launch of their negotiations until Tuesday.
Tuesday's talks were progressing positively, delegates contacted inside the prime minister's residence said.
"The leaders, in principle, have reached consensus on almost all political issues including the Maoists' arms management," said Amik Serchan, deputy prime minister and head of People's Front Nepal, one of the seven parties in the alliance government.
"This shows that the talks are close to reaching a deal for permanent settlement," he said.
A leader from Nepal's biggest party was also upbeat.
"There has been significant progress in the ongoing peace talks between the seven-party alliance and the Maoist rebels. The leaders are very close to consensus on political issues and the Maoist arms management deal," said Arjun Narsingh KC, a senior Nepali Congress leader.
Labour Minister Ramesh Lekhak said Monday "technical problems" had cropped up during informal discussions between leaders of Nepal's seven-party coalition government.
Negotiators had expected a breakthrough in Nepal's protracted peace process after the Maoists agreed at the weekend to lock up their weapons and place them under United Nations supervision.
The disarming of the rebels had been a sticking point in the six-month-old peace process aimed at ending a bloody conflict that has claimed at least 12,500 lives in Nepal over the past decade.
But the process hit another snag on the question of whether the future of the monarchy should be determined in a national referendum, or during elections to choose a body to redraft the country's constitution, Lehkak said.
Monday's informal talks also stumbled because two of the largest parties in government could not agree on the make-up of the interim parliament.
The multi-party government came to power in April after mass protests forced King Gyanendra to end direct rule.
Since declaring a cease-fire in May, the government and rebels have held two rounds of high-level peace talks.
In June, the government and the Maoists agreed to hold elections to a constituent assembly to rewrite the country's basic law, meeting a key rebel demand.
The two sides also agreed five months ago to form an interim parliament that would bring the Maoists into the country's political mainstream.
This is the third time the two sides have tried to hammer out a peace deal. Two previous attempts, in 2001 and in 2003, both failed, plunging the country back into conflict.