The amendment to the Army Bill 2006 also has a provision to establish a special military court to look into criminal offences involving army personnel such as corruption, torture and disappearance.
As per the new law, the title of Supreme Commander-in-Chief enjoyed by the King has been removed and the Nepalese Army now comes under the control of the government and the House of Representatives, a Parliament member said.
The amended Army Act formally cuts the 240-year old link between the King and Nepalese Army by bringing the army under civilian control.
Minister for Law and Justice Narendra Bikram Nemwang introduced the amendment to the House of Representatives on behalf of Prime Minister G P Koirala, who also handles the Defence portfolio, state run Radio Nepal said.
The Government has already dissolved the powerful Military Secretariat under the Royal Palace after a popular pro-democracy agitation forced King Gyanendra to end his absolute rule.
A Parliament Declaration of May 18 had renamed the Royal Nepalese Army into Nepalese Army. From now on, the Nepalese Army would be accountable to the Parliament and has come under civilian control, a lawmaker said.