Shah, the only son of deposed King Gyanendra, admitted firing his gun but defended his action, saying he could not bear to hear insults against his family and country.
He said in a statement that two guests at a restaurant at a resort in southern Nepal had made "baseless and provocative remarks against his role and the institution he represented." Shah said he left the restaurant, returned half an hour later and fired his gun into the air once, without harming anyone or causing damage.
Shah then fled to another resort in Pokhara, 125 miles (200 kilometers) west of Katmandu, where he was detained. Local television stations reported that police had taken complete control of the resort.
During his years as crown prince, Shah was often criticized for hard partying and frequent brawling. Several street protests were held against him, but he has never faced a criminal investigation or charges.
Nepal's Constituent Assembly abolished the centuries-old monarchy in 2008. Shah moved to Singapore with his wife and children but frequently visits Nepal.
Gyanendra assumed the throne in June 2001 after his elder brother, King Birendra, was killed along with his family in a massacre inside the royal palace.
A government investigation was ordered into the massacre, in which 10 people died, but the report was inconclusive and left some questions unanswered. Many Nepalis suspect Gyanendra and Shah were somehow involved in the slayings.
Gyanendra seized absolute power in 2005, but pro-democracy protests in 2006 forced him to give up his authoritarian rule and restore democracy. Two years later, the monarchy was abolished and Nepal was declared a republic.