A senior US official said Thursday that his country was reviewing a terrorist tag it had placed on Nepal's ruling Maoist party, dpa reported.
Removal of the label on the former rebels would largely depend on their actions, said Richard Boucher, US assistant secretary of state for South and Central Asian affairs.
"When we think they have done the necessary things like rejecting terrorism in word and deed, then they will be taken off the list," Boucher told reporters in Kathmandu.
Boucher's comments came a day after Nepalese Prime Minister Pushpa Kamal Dahal called on the visiting US envoy to remove his party from the terrorism list.
Dahal argued that the Maoists should be removed from the list because they had given up fighting and had affirmed their commitment to multiparty democracy.
But Boucher said despite growing contacts between US officials and Nepal's Maoists, the two government had yet to establish normal relations.
However, relations with the Maoists would not be an obstacle to continued US assistance to Nepal, Boucher said.
"We are dealing with the Maoists in the government as a responsible authority, and we will try to ensure that we deal with the government in a normal way and we will continue our assistance programme," Boucher said.
"But at the same time, we still don't have normal relations with the Maoist party," he said.
Boucher arrived in Kathmandu on Wednesday on a two-day visit to the Himalayan nation. During his stay in Kathmandu, he met President Ram Baran Yadav, the prime minister, foreign minister and leading politicians and government officials.
The Maoists formed a coalition government after emerging as the single largest party in elections in April. They entered the government after signing a peace agreement with the government in November 2006 following a decadelong insurgency that claimed nearly 14,000 lives.