The small Himalayan nation has asked Moscow not to recruit its citizens and immediately send back any Nepali soldier commissioned there, after it revealed six soldiers serving in the Russian military had been killed.
"The government of Nepal has requested the Russian government to immediately return their bodies and pay compensation to their families," the foreign ministry said.
Diplomatic efforts are under way to secure the release of one Nepali citizen serving in the Russian army who was captured in Ukraine.
Nepal's ambassador in Moscow, Milan Raj Tuladhar, was quoted by The Kathmandu Post as saying 150 to 200 Nepalis were working as mercenaries in the Russian army.
Nepali soldiers, known as Gurkhas, are renowned for their bravery and fighting skills.
They have been serving the British and Indian armies following the independence of India in 1947 under an agreement between the three countries.
Nepal said it has no such agreement with Russia.