(Adds Indian and U.S. comments, paragraphs 9-12)

By Gopal Sharma

KATHMANDU, April 1 (Reuters) - Nepal's former Maoist guerrillas joined an interim government on Sunday under a peace deal that takes them into the political mainstream after a decade-long conflict.

The once-feared Maoists signed a peace deal in November with the multiparty government, ending their revolt against the monarchy that killed more than 13,000 people.

Prime Minister Girija Prasad Koirala named five nominees of the Communist Party of Nepal (Maoist) to his new 22-member multiparty cabinet following two days of haggling over posts.

"A new chapter has begun in the history of Nepal," Koirala told the interim parliament which the Maoists joined in January.

"Let's all unite and complete this chapter."

On Sunday, Koirala, 85, ceremonially stepped down, only to be re-elected by the interim assembly. He then took the oath of office for the sixth time in the cathedral-like parliament.

It was the first time King Gyanendra, who ended his absolute rule last year under pressure from Maoist-backed popular protests, had no role in naming the prime minister.

Koirala then swore in his interim team, including new Information and Communications Minister Krishna Bahadur Mahara, former spokesman and chief Maoist negotiator in the peace process, at a ceremony attended by Maoist chief Prachanda.

Landlocked Nepal's influential neighbour India welcomed the new government.

"The formation of the interim government marks another step forward in the implementation of the peace process," India's foreign ministry said in a statement.

Impoverished Nepal's key donor, the United States, which still lists the Maoist group as a terrorist organisation, asked the Maoists to fully abandon violence.

"As a partner in the interim government, the Maoists must now be held fully accountable for their actions," a U.S. embassy statement said.

MILESTONES

European Union president Germany hailed the formations of the new interim government and parliament as "important milestones in the peace process in Nepal".

Ian Martin, special representative of the United Nations Secretary-General, congratulated the eight parties involved and called on them to create a more inclusive democracy and establish effective law enforcement.

Martin said they also needed to create conditions to elect a constituent assembly. That body will prepare a new constitution and decide the future of the monarchy, which the Maoists want abolished.

Party officials said the elections could be held on June 20.

"We will focus on holding the constituent assembly elections and work in consensus with other parties in the government," Mahara told reporters after a brief cabinet meeting.

The more broad-based government is expected to boost a peace process clouded by unrest in Nepal's southern plains by ethnic Madhesi people, in which at least 58 people have died this year.

The Madhesis complain of discrimination by the political elite from the mostly mountainous north.

Analysts said deteriorating law and order could pose a threat to the elections and urged the government to quickly engage the Madhesis and other ethnic groups who want more government jobs and seats in the parliament.

They also say the former guerrilla Maoists must now show they can take part in constructive government.

"Any betrayal by the Maoists will also be a serious setback for the democratic as well as the peace processes," said Yubaraj Ghimire, editor of news magazine Samay.

The Maoists have confined 31,000 fighters to camps and locked up nearly 3,500 weapons under U.N. supervision as part of the peace deal. They have vowed to accept the outcome of the constituent assembly vote and believe it will end the monarchy.

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