Gyanendra and his wife Komal Shah left in the back of a black Mercedes as hundreds of riot police surrounded the main gate of the sprawling Narayanhiti palace complex in the heart of the ancient temple-studded city.
Shouts of "long live the republic" rang out from a crowd of about 500 people who watched Gyanendra's departure while a few pro-royalists cried.
"Former king Gyanendra Shah and his wife Komal Shah have left the palace," police officer Bharat Lama told AFP.
The 60-year-old ex-king, who was regarded as a god by devout Hindus, showed no emotion as he drove away in a small convoy of three vehicles to the hunting lodge, a large drab concrete structure in a forest reserve on the city's edge.
The building is a sharp contrast to his former palace home set in acres of lush manicured gardens in the heart of Kathmandu.
"Now I feel the country is truly a republic," an ebullient Prabhat Bogati, a 23-year-old student, told AFP.
But for social worker Ambika Rana, 54, the king's departure was a huge loss for the impoverished Himalayan country.
"I feel I've lost a guardian. The monarchy was a symbol of pride and unity and I'm deeply saddened it's not there anymore," Rana said, tears streaming.
His departure capped a turbulent reign that began in 2001 when he was vaulted to the throne by the massacre of his popular brother, King Birendra, and other royals by the crown prince, who later shot himself.
The decision to abolish the world's only Hindu monarchy was taken last month by an assembly elected as part of a peace deal between the Maoists and mainstream parties who joined forces to oppose Gyanendra after he seized direct control.
Nepal's former rebel Maoists, who waged a deadly civil war for a decade to topple the 240-year-old monarchy, welcomed Gyanendra's decision to leave the palace voluntarily.
His departure "is a good sign that he's taking the declaration of a republic well," Maoist spokesman Krishna Bahadur Mahara said.
Gyanendra, who will stay in the hunting lodge until he finds a new home, was never able to win the popularity of his genial, well-loved brother, who was seen as a symbol of unity in Nepal.
He also lost the support of many Nepalese when he seized absolute power to crush the Maoist revolt that claimed 13,000 lives before the peace deal in 2006.
His departure from the palace came hours after he addressed the nation on television, his first statement since the republic was declared on May 28.
Sitting surrounded by two stuffed tigers and a rhino head, Gyanendra said he "respected the verdict of the people" and vowed he "will not leave this country" and go into exile.
In a sober speech, which lasted 14 minutes, he also hit back at charges he was behind the palace slayings and had robbed the nation.
"My family and I have been continuously defamed with ill intentions which was saddening and still is. The accusations targeted against us were inhuman," he said.
Many Nepalis believed he plotted the palace killings, even though an official probe cleared him.
"There was also an accusation I have lots of property and money abroad," he said. "All my properties are in Nepal. All the properties I have are nationalised."
Gyanendra said he had handed over his diamond, ruby and emerald-adorned crown and sceptre that will be housed in the palace, which will become a museum.
"The crown and sceptre used by the Shah dynasty I have given to the Nepal government," he said.
Gyanendra stopped short of apologising to those killed during his reign, which was marked by a bloody crackdown against pro-democracy demonstrators.
"If any people have been harmed, I hope you understand it was unintentional," he said.
The government allowed the former king to keep 75 security personnel. But Gyanendra and his former queen will lose 600 domestic staff.
"All former royal staff including palace secretaries, housemaids, gardeners, cooks and cleaners have become government employees," a home ministry spokesman said.
Gyanendra's son Paras -- whose reported playboy antics and wild driving were seen as highly damaging for the monarchy -- moved earlier into a private residence in Kathmandu's diplomatic quarter.
by Sam Taylor
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