Gyanendra sacked the prime minister, detained political leaders and imposed a state of emergency on February 1 saying politicians had failed to end a bloody conflict with Maoist rebels, who are fighting to overthrow the constitutional monarchy.
The appointment of the Corruption Control Royal Commission came a day ahead of an anti-king protest planned by members of the Nepali Congress, one of the country's largest parties.
The human rights situation in Nepal, where soldiers are battling Maoist guerrillas in a nine-year conflict, had worsened after the king assumed absolute power and suspended civil liberties, Amnesty officials said after a tour of the country. The rights watchdog called on the international community - particularly India, Britain and the United States - to suspend military aid to the Himalayan kingdom to pressure it to change its human rights policies.
"The longstanding conflict between the Maoists and the armed forces has destroyed human rights in the countryside," Irene Khan, Amnesty's secretary general, told reporters in New Delhi.
"Now, the state of emergency is destroying human rights in the urban areas, taking the country to the brink of disaster," Khan said. "Wherever we went, we encountered a deep sense of fear, uncertainty and insecurity among people."
Political parties say hundreds of people, including politicians, student leaders, trade union representatives and human rights workers have been detained or put under house arrest across the country since the king's move.
British Foreign Secretary Jack Straw, weighed in saying the governments of Britain, the United States and India were working together to build pressure on the king after his latest moves.
"We have jointly decided to withdraw our ambassadors for consultations and to make a protest to the King of Nepal about the action he has taken," Straw told reporters in the northern Indian city of Amritsar.
Amnesty's Khan said while Nepali authorities had freed some political leaders, more were being arrested, particularly in the countryside. On Wednesday, police took away two senior politicians ahead of planned protests against the king.
More than 11,000 people have been killed in violence and thousands have fled the countryside to escape what rights groups say are brutalities by both the guerrillas and government forces.
Khan said she had an audience with Gyanendra who assured her of his commitment to uphold human rights and Nepal's international obligations.
"The king will be judged not by his promises but by how those promises are put into action," she said, adding the early signals were not positive.
"Time is running out. Nepal is on a downward spiral. The international community has consistently failed the people of Nepal over the past decade. It must not do so again."