The first round of elections in provinces 3, 4 and 6 and the second round in provinces 1, 2, 5 and 7 will be held on May 14 and June 14 respectively.
The absence of elected representatives in the local bodies for more than 15 years obstructed development in the villages and towns across the country including the capital city Kathmandu.
Local-level elections could not be held after 1997 largely as a result of the decade-long Maoist insurgency that claimed more than 16,000 lives.
The elections will take place across Nepal after a gap of 20 years. They should be held in every five years but due to political instability, they were halted since May 1997.
Local bodies remained ignored during the long transitional period even after the peace deal signed between the government and the Maoists in November 2006.
Prime Minister Prachanda on Saturday appealed to the eligible voters to use their sovereign voting rights by casting votes.
"I urge all the electors to participate in this historic local-level election and use their sovereign voting rights. In a democracy, people can exercise their sovereign rights through election," Mr Prachanda said in a statement.
"On the one hand, the local polls have stood as a linkage to direct Nepal's peace process to a logical conclusion, while on the other, it can be looked upon as a milestone to end the unitary and centralised governing system and establish federal governance," Mr Prachanda said.
This election will open door for meting out the rights and resources centralised at Singha Durbar (central government secretariat) to people's doorstep, the prime minister said.
Nepal's Supreme Court last week reinstated the country's first woman chief justice Sushila Karki and directed Parliament to halt her impeachment as the tussle between the legislature and the judiciary took a dramatic turn.
Just hours after the Supreme Court's interim order, Chief Justice Karki returned to office.
As a fallout of the impeachment motion, Deputy Prime Minister and Minister for Home Affairs Bimalendra Nidhi had resigned over his dissatisfaction with the move.
Also, Nepal's Rastriya Prajatantra Party had quit the Prachanda-led government, a day after withdrawing its support to it over the impeachment motion against Chief Justice Karki.
Chief Justice Karki had assumed office as Nepal's first woman Chief Justice on August 1 last year.
The developments come at a time when the ruling coalition struggled to secure a two-thirds majority to pass the Constitution amendment bill.
Nepal has been witnessing political instability.
Although major Madhesi group -- the Rastriya Janata Party Nepal -- has decided to boycott the first phase of polls, two other Madhesi parties -- Federal Socialist Party and Madhesi Peoples Forum Democratic -- would participate in the polls.
Six Madhesis on Tuesday joined Mr Prachanda's council as ministers, in a move seen as a shot in the arm for the Nepal government.
Some Madhes-centric parties have opposed the elections until the Constitution is amended to accommodate their views: more representation in parliament and redrawing of provincial boundaries.
The Nepal government has tabled a new Constitution amendment bill in the Parliament to address the demands of the agitating Madhesi parties.
Madhesis, mostly of Indian-origin, launched a prolonged agitation between September 2015 and February last year against the implementation of the new Constitution which they felt marginalised the Terai community.