Authorities last month charged Chandra Kant Raut, a former scientist with a doctorate from Britain's Cambridge University, with treason over his calls for a separate homeland for Nepal's marginalised Madhesi community who live in the southern plains.
Around 15 protesters gathered around a kilometre from the venue hosting meetings between leaders of eight South Asian Association for Regional Cooperation (SAARC) nations.
Police said they defied orders to keep the area clear.
"We told them to move and hold the protest somewhere else but they refused."
Binay Panjiyar, one of those arrested, said it was a peaceful sit-down protest and there was no justification for their detention.
"We were far enough from the venue and were not blocking any traffic," Panjiyar told AFP by mobile phone from police custody.
The arrests come two days after Raut's release on bail. Police originally detained him in September and held him for weeks while preparing charges.
But lawmakers in Kathmandu have struggled for years to agree on a draft constitution that would address their demands by dividing the country into new federal states.
Nepal has endured prolonged political limbo since the end of a decade-long civil war in 2006.
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