The Nepalese capital Kathmandu is under a curfew, which the government imposed after the city erupted in violent protests against the killing of 12 Nepalese workers in Iraq.
A video of the killings was posted Tuesday on the web site of an Islamic militant group. On Wednesday, at least a thousand Nepalis poured into the streets of Kathmandu to vent their anger.
Hundreds of youths stormed a local mosque and tried to set it ablaze as they hurled insults at Muslim militants in Iraq.
The local office of an Arab airline was also attacked.
Kedar Poudyal of Nepal's National Human Rights Commission says protesters halted traffic in parts of the city, despite a heavy police presence and the use of tear gas. "There are people coming out in the streets raising slogans and some destruction of vehicles and burning of motorbikes."
Many Nepalis blame the incident on local employment agencies that allegedly sent Nepalese workers to Iraq despite a government ban on the practice.
One of the victim's friends told the local media the government should have done more to stop the agencies. He says the employment firms should not have ignored the government policy preventing workers from going to Iraq. That they could coordinate the trips anyway, he says, shows how ineffective the government has become.
Protesters attacked at least a dozen of the employment agencies throughout the city.
The Labor Ministry was also attacked and office windows there were shattered before police could break up the mob.
The Nepalese government insists it did try to free the hostages but was unable to contact the kidnappers. The 12 were seized by an insurgent group in Iraq ten days ago.
The video released Tuesday showed a kidnapper cutting one man's neck and then shooting the other hostages.