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The aircraft reported a problem in one of its engines soon after take-off at 9.20 am on Monday from the Tribhuvan International Airport, according to airport sources.
It hovered over the skies in Dharke for some time.
The pilots later told the control tower they will continue with the flight after finding out that all indicators were normal.
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Minister of Culture, Tourism and Civil Aviation Sudan Kirati shared on his Facebook account that the FlyDubai aircraft was flying to its destination safely and urged everyone not to worry about it.
“FlyDubai flight number 576 (Boeing 737-800) Kathmandu to Dubai flight is normal now and proceeding to her destination Dubai as per the flight plan,” Civil Aviation Authority of Nepal said in a tweet on Monday.
There are more than 160 people on board including 50 Nepali passengers.
Eye-witnesses had earlier claimed they saw the aircraft catching fire in the Kathmandu sky.
Fire engines were also kept on alert at the Kathmandu airport, according to sources.