The bomb went off as a political rally was ending in Birgunj, 80 kilometres south of Kathmandu.

'Around 34 people have been injured in the bomb blast just outside the venue,' Ramesh Shekhar Bajracharya, a senior local police officer told reporters.

The rally was organised by the country's mainstream political parties and former Maoist rebels as part of a joint campaign to prepare for crucial elections planned for April that will decide Nepal's political future.

The area was hit by several blasts ahead of the rally, with officials blaming ethnic Mahadhesi extremists who have vowed to derail the polls unless the government agrees immediately to grant the fertile plains region greater autonomy.

Mahadhesis, who make up nearly half of Nepal's 27 million population, say they are second-class citizens and that elites from hill areas dominate the government, police and army.

Around two dozen armed groups have emerged in the southern Terai plain which borders India since a 2006 peace deal between Maoist rebels and mainstream parties.

'Most of the injuries are from shrapnel and the injured have been taken to hospital,' said Yogeshwor Rom Khami, superintendent of police in Birgunj.

The town had been hit by several blasts ahead of the rally, with officials blaming ethnic Mahadhesi extremists who have vowed to derail the polls unless the government agrees to grant the fertile plains region greater autonomy.

Mahadhesis, who make up nearly half of Nepal's 27 million population, say they are second-class citizens and that elites from hill areas dominate the government, police and army.

Around two dozen armed groups have emerged in the southern Terai plain, which borders India, since a 2006 peace deal between Maoist rebels and mainstream parties.

The April elections are for a body that will rewrite Nepal's constitution and are expected to result in the Himalayan nation being declared a republic, formally ending a 239-year-old monarchy led by unpopular King Gyanendra.

The Maoists have accused the king's allies of involvement in the unrest in the south.

Diplomats have also said they suspect hardline Hindu groups across the border in India may also be involved in the unrest.

Earlier this month, the United Nations' representative to Nepal, Ian Martin, called on the government to take 'urgent measures' to address the worsening security situation in the south.

But government spokesman and top Maoist official Krishna Banadur Mahara said the bombing would not derail the polls.

'We condemn the incident but such activities will not put us off from holding the elections,' he said.

Nepal's elderly prime minister, Girija Prasad Koirala, was also quoted by state media after the blast as promising to 'fulfill the desires of the Terai people.' -- AFP