Hours after signing a historic peace deal with the Nepal government, Maoist chief Prachanda on Wednesday renounced armed struggle and promised to work for the all round development of the Himalayan country.

Making his first public appearance in 25 years, Prachanda said he came to the negotiating table after realising that his party would not be able to take over the central power of the state through armed revolution alone.

"So we have chosen the path of negotiation and formed an alliance with the political parties," the 51-year-old Maoist leader said.

Prachanda, whose real name is Pushpa Kamal Dahal, said that he believed that the historic agreement 'will provide a political outlet to longstanding quagmire and lead the nation in the direction of all round socio-economic development'.

Under the pact, the rebels agreed to lock up their arms and form an interim government with the ruling seven-party alliance.

Prime Minister Girija Prasad Koirala described the deal as a victory for all Nepalese and the 'foundation stone for the establishment of a new, revolutionary Nepal'.