The Nepal Army personnel have opened fire after inmates at the Dhading District Prison tried to escape.
A prisoner, aged around 75, has died after being shot at during the incident. Seven prisoners have been injured.
According to Chief District Officer Bijayraj Subedi, the army opened fire after the prisoners tried to break through the security cordon and escape.
Seven people from the Nepal Police and Armed Police Force were injured in the incident. The prisoners who were injured in the shooting have been sent to Kathmandu for treatment.
On Tuesday, prisoners set fire to the prison, demanding their release, saying that former Home Minister Rabi Lamichhane and other prisoners had been released from Nakkhu prison in Kathmandu.
Before opening fire, the army had tried to control the situation by using water cannons. The army opened fire after they started attacking the army personnel itself.
There are 243 prisoners including nine women in the Dhading District Jail.