Gyanendra, who sacked the government and declared emergency rule on February 1, remained defiant, saying in a statement he had seized power to safeguard democracy which had been under threat from Maoist rebels and political instability.
"Everyone is aware that politics bereft of democratic norms and values had caused despair and confusion to spread among the people, resulting in growing disillusionment with democracy itself," he said.
"Terrorist activities, coupled with politics far removed from the common man, gave a fillip to instability in the nation putting democracy at risk."
When he took over, the king said he was doing so to end an increasingly bloody Maoist insurgency that has claimed over 11,000 lives since 1996, and pledged to restore democracy in three years.
Thousands of people flocked to official Democracy Day celebrations at the Kathmandu Parade Ground, where they queued to greet the king and Queen Komal, who was marking her 55th birthday, witnesses said.
The event drew enthusiastic groups of school pupils, sportspeople, cultural troupes, bands and personnel from the army and police, and representatives of social and professional organisations, they said.
The king's appointed government, meanwhile, announced the release of 150 prisoners who have completed two-thirds of their terms from prisons across the country.
Opposition parties, saying they had nothing to celebrate, however, staged sporadic protests in various parts of the capital in defiance of a ban on rallies.
Witnesses said at least 15 people had been arrested when they shouted anti-monarchy slogans and held brief demonstrations demanding the king restore civil liberties.
Telephone lines were cut or jammed in what was seen as a move to try to prevent activists communicating with each other about the protest, while riot and armed police patrolled the streets.
The Maoist-imposed indefinite transport blockade, meanwhile, entered its seventh day Friday with vehicles being escorted in and out of Kathmandu by the army.