Thousands of irate agitators on Wednesday set fire to Nepal's biggest mosque, destroyed offices of job recruitment agencies and clashed with policemen in protest against the killing of 12 Nepalese labourers in Iraq.

The protestors took to the streets, disrupting traffic and shouting slogans, before attacking the mosque and destroying the offices of more than a dozen employment agencies even as police fired tear gas in an attempt to disperse the mob.

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"We want revenge," the demonstrators shouted as they stormed the Jama Masjid, located in the centre of the Nepalese capital, Kathmandu, near Narayanhity, the royal palace.

They broke windows and set fire to carpets, furniture and parts of the mosque, which was empty at that time. Riot police used batons to push the angry protestors back from the mosque and eventually sealed it.

Major television channels had shown grieving family members of those killed in Iraq. In parts of the capital, protestors blamed the government for not doing enough to secure the release of the 12 Nepalese workers who were killed on Tuesday.

They clashed with police, burnt motor tires, blocked roads, broke signboards and set fire to electrical equipment and furniture of offices belonging to manpower agencies that send workers abroad. A mob also ransacked the office of Qatar Airlines, reports said.

The situation became tense as student and political party activists joined the protests, police officials said. All the major markets were shut down, schools and colleges were closed and vehicles remained off the roads completely paralysing life in the Kathmandu valley.

Besides the capital city, demonstrations were also held in Jhapa, Gorkha, Dhanusa, Dhankura and Lamjung districts. Mobs clashed with the police in various places, including Ratnapark, Jamal, Chabahil, Kalimati, Bauddha, Maharajgunj and Lainchaur.

The government has issued a statement asking people to show tolerance and patience over the tragic killing of the Nepalese labourers in Iraq.

A video posted on a website on Tuesday showed militants slitting the neck of one Nepalese worker and shooting 11 others. The labourers had disappeared soon after entering Iraq from Jordan on August 19.

Nepal has condemned the killings as a 'heinous crime against the innocent civilians'.