The statement from Paudel's office late on Friday came just hours after he announced former Chief Justice Sushila Karki would lead the country on an interim basis following the deadly "Gen Z"-led anti-graft protests that forced former prime minister KP Sharma Oli to resign.
According to the statement, the president has "dissolved the House of Representatives" and fixed March 5, 2026, for the elections.
Karki was appointed after two days of intense negotiations between Paudel, army chief Ashok Raj Sigdel and the protest leaders behind Nepal's worst upheaval in years, in which at least 51 people were killed and more than 1300 injured.
Nepal's southern neighbour, India, said it hoped the developments would help foster peace and stability.
"Heartfelt congratulations to the Honorable Sushila Karki Ji on assuming the office of Prime Minister of Nepal's interim government. India is fully committed to the peace, progress, and prosperity of Nepal's brothers and sisters," Indian Prime Minister Narendra Modi said in a post on X.
The country-wide protests were sparked by a social media ban that has since been rolled back. The violence subsided only after Oli resigned on Tuesday.
Nepal has grappled with political and economic instability since the abolition of its monarchy in 2008, while a lack of jobs has driven millions of young people to seek work in the Middle East and countries such as South Korea and Malaysia.
By Saturday, normality was returning in the country of 30 million people tucked between China and India, with shops reopening and vehicles returning to the streets in most parts of the capital Kathmandu after some prohibitory orders in force since Tuesday were suspended.
Relatives of the deceased gathered outside the prime minister's official residence in Kathmandu, demanding martyr status for those killed - which confers recognition that they died in the service of their country - and compensation.
Some refused to take the bodies of their relatives from the morgue until their demands were met.
"My brother should be declared a martyr as he died for the country, and the government should give compensation to my parents," said Sumitra Mahat, sister of 21-year-old Umesh Mahat, who was killed during the protest.
She and other family members stood in front of the prime minister's official residence with a banner displaying pictures of some of those who died.
Most said their relatives had been shot.
