The newly-elected assemblies will be tasked with naming their provinces, choosing capitals and negotiating budgets with Kathmandu - all sensitive issues that could rekindle tensions in the ethnically-diverse south.
Nepal has a total of 15.4 million registered voters, out of which more than 3 million had voted in the first phase of the elections that were held on November 26 across 32 districts in the northern part of the country.
Thousands of police and soldiers had been deployed ahead of polling day in the capital Kathmandu and the populous lowlands, with the build-up to the vote hit by violence that has left one dead and dozens injured.
The observers also said that they were very impressed to see that people and political parties of Nepal enthusiastically and harmoniously participated in the elections.
"People will get better representation and the development agendas of the country will be in focus", he said after casting his ballot in the southern city of Birgunj.
The completion of the second phase of elections will ensure a federal parliament at the centre and provincial assemblies in seven provinces as envisioned by the new constitution adopted in 2015.
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"If they can not fulfil their promises then the groups that have been part of the struggle will not stay quiet".
Years of political turbulence have hampered development in the impoverished Himalayan nation, which is still recovering from a powerful quake that hit two years ago, killing 9,000 people and destroying over half a million homes.
It took nine years after the end of a decade-long civil war to agree to a new constitution.
But it also sparked deadly protests in the south by ethnic minority groups who say the charter leaves them politically marginalised, and have demanded changes to it.
The 165 directly-elected lawmakers will enter Nepal's 275-member parliament, with the remaining 110 lawmakers to be selected later with the proportion depending on the percentage of votes each political party wins.
Nepal's mountainous north voted in the first phase 10 days ago. Vote counting started in most of the parts from Thursday evening.
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