Nepali police shot dead a man on Wednesday for violating a curfew imposed after mobs attacked a mosque in Kathmandu and rampaged on the streets chanting "Down with Islam" to protest the killing of 12 Nepalis in Iraq.
Protesters stormed inside the city's main mosque, set furniture and carpets on fire and tore up a copy of the Holy Quran, before police drove them out.
Riot police cordoned off the mosque, which was obscured from afar by thick clouds of smoke rising from burning tyres on roads leading to the building.
"Demonstrators entered the mosque, threw stones and partially damaged it," said police official Binod Singh. "They tried to set the building on fire but police intervened and prevented them."
Police clamped an indefinite curfew on the capital and later fired on a group of people who gathered in downtown Kathmandu despite the ban, killing one man, an official said.
Calm gradually returned after the curfew took effect at 2 pm (0815 GMT) and most of the capital's streets emptied. King Gyanendra urged people of different faiths to stay calm in a nation already torn by a Maoist revolt.
"We must ensure this tragic incident does not weaken the age-old fraternal ties, unity and mutual tolerance that exists among the Nepalese people," the royal palace said in a statement.
Earlier, crowds of people burst into the offices of Saudi Arabian Airlines and Qatar Airways, smashing windows and taking papers and furniture onto the street to burn.
Clashes with police also erupted outside the Egyptian embassy as a group ransacked the adjoining offices of a manpower recruitment company. Police lobbed teargas shells and fired water cannon at about 3,000 demonstrators burning tyres at a main intersection near the Jama Masjid mosque in the heart of the city.
For much of the day, a pall of smoke hung over the capital of the Hindu kingdom after tyres were set on fire at almost every major street corner. Crowds brought out logs and firewood to feed the flames.
Authorities said they had imposed the curfew "to maintain law and order, and to protect the loss of life and property".
Protesters shouted "Down with Islam", "Long live the memories of the 12 Nepalis", and called for the government to resign for doing too little to protect the victims.
Offices of manpower companies which recruit Nepalis to work abroad were also indiscriminately attacked and their contents burned on the streets. A media company which runs a television station and publishes newspapers was also attacked.
Prime Minister Sher Bahadur Deuba declared Thursday a national day of mourning "to show unity against terrorism".
"I appeal to everybody to show restraint and not engage in provocative activities aimed at any community," he said in a national address. He promised victims' families would be given one million rupees ($14,000).
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