When the arch-conservative Mohan Shamsher took over as prime minister in 1948, he quickly outlawed the Nepali National Congress and showed no interest in implementing the new constitution that was scheduled to take effect in April. He rejected the more progressive wing among the Rana aristocracy, leading several well-known opponents to found the Nepal Democratic Congress (Nepal Prajatantrik Congress) in Calcutta in August 1948. This group was well funded and publicly advocated the overthrow of the Ranas by any means, including armed insurrection. It tried to foment army coups in January 1949 and January 1950 but failed. When the Rana government arrested B.P. Koirala and other organizers in October 1948 and subjected regime opponents to harsh conditions and even torture in jail, its democratic opponents turned against it again. Even the release of B.P. Koirala in June at the insistence of Indian political leaders did little to help the negative political climate. When Mohan Shamsher convened Parliament in September 1950, supposedly in keeping with the constitution, it was so full of Rana appointees that no one in the opposition took the legislature seriously. The Nepali National Congress absorbed the Nepal Democratic Congress in March 1950 and became the Nepali Congress Party, and it formally decided to wage an armed struggle against the Rana regime. On November 6, King Tribhuvan Bir Bikram Shah, who had long been making anti-Rana statements, escaped from the palace and sought asylum in the Indian embassy in Kathmandu. Armed attacks by 300 members of the Nepali Congress Party's Liberation Army (Mukti Sena) began in the Tarai on November 11, initiating revolution in Nepal.

Mohan Shamsher found himself in a very unfavorable international climate. The British had left India in 1947, and in their place was a democratic government dominated by the Indian National Congress, led by Jawaharlal Nehru. The government of India had no interest in preserving the autocratic rule of native princes and had forcibly taken over the lands of the few princes who had opposed union with the new India. Furthermore, members of the underground Nepalese opposition had helped their Indian colleagues during the struggle against the British. B.P. Koirala had met with Nehru and with Gandhi as well. Changes to the north added an element of power politics to the situation. The Chinese revolution had ended in 1949 with the victory of the Chinese Communist Party, ending 100 years of weakness. Tibet again came under China's control in 1950. India, faced with an expansive military power operating under a radically different political philosophy on its long northern borders, could not afford a destabilized Nepal. Thus, the king was assured of asylum in the Indian embassy, and the Liberation Army of the Nepali Congress Party was able to operate freely from bases along the Indian border with Nepal.

The revolution consisted of scattered fighting, mostly in the Tarai, and growing demonstrations in the towns of the hills. The initial strategy of the insurgents was to capture the rich Tarai area, which produced much of the country's grain. Rebels were able to capture several towns there but never were able to hold them against counterattacks by the army. Armed struggles did not develop in the Kathmandu Valley, but demonstrations of up to 50,000 people demanding the return of the king occurred in late November. Meanwhile, insurgents were infiltrating hill areas in the west and the east, where army operations were more difficult. After several weeks of growing demonstrations and dissension in the ranks of local commanders, Palpa fell from government control on January 6, 1951. Rebels took over in Pokhara for a day on January 9-10 and occupied Gorkha for part of January 10. Sporadic fighting in western Nepal led to the fall of many towns in mid-January. By this time, some "C" class Rana officers had resigned their commissions in protest, and troops were beginning to surrender to the rebels.

Negotiations between the Indian government and the Ranas had begun on December 24, 1950 in Delhi, finally leading to a proclamation on January 8, 1951 by Mohan Shamsher, who promised restoration of the king, amnesty for all political prisoners, and elections based on adult suffrage no later than 1952. The king formally agreed two days later, and a cease-fire went into effect on January 16. Further negotiations among the Ranas, the king, and the Nepali Congress Party produced an interim ministry headed by Mohan Shamsher with five Ranas and five Nepali Congress Party members. The king returned to Kathmandu, and the new ministry was sworn in during February 1951.