By Khaled Yacoub Oweis

BEIRUT (Reuters) - Hezbollah on Saturday began withdrawing gunmen from Beirut and handed control of the streets to the Lebanese army, after seizing much of the city in gunbattles with supporters of the U.S.-backed government.

Hezbollah, a political group backed by Iran and Syria with a guerrilla army, said it was ending its armed presence in Beirut after the army overturned government measures against the group.

Hezbollah took over much of Beirut on Friday after fighters loyal to the group routed gunmen loyal to the anti-Damascus governing coalition.

Four days of fighting which killed 37 people erupted after the government said it was taking action against Hezbollah's military communications network and sacked the head of security at Beirut airport, who is close to the group.

It was the worst internal fighting since Lebanon's 1975-90 civil war. Hezbollah said the government had declared war by moving against the communications network, which played a crucial role in its 34-day war with Israel in 2006.

The Hezbollah-led opposition said it would maintain a "civil disobedience" campaign until all of its demands were met. That would include barricades on major roads, including all routes to the paralyzed airport, a senior opposition source told Reuters.

Lebanon has been in political deadlock for 18 months over opposition demands for a greater say in government.

Prime Minister Fouad Siniora, whose legitimacy is disputed by the opposition, on Saturday handed responsibility for the moves against Hezbollah to the army, which has sought to avoid conflict with either side.

The army overturned them, saying it would handle the issue of the communications network in a way "that would not harm public interest and the security of the resistance." It also said it was reinstating the head of airport security.

The army is seen as a neutral player in the political crisis.

Governing coalition leader Saad al-Hariri, Lebanon's most powerful Sunni politician and a close ally of Saudi Arabia, said he welcomed the army's decision and called on his supporters to remain calm and avoid confrontation.

Much of the fighting has been between Sunni supporters of Hariri and Shi'ite gunmen loyal to the opposition.

Two soldiers and 17 gunmen died in clashes on Saturday east of Beirut and in north Lebanon. In the deadliest incident, security sources said at least 12 gunmen died when pro-government fighters stormed an office of a pro-Syrian opposition group in the village of Halba in north Lebanon.

Two people were killed in the capital when shots were fired at the funeral of a government supporter. At least 100 people have been wounded in recent days.

Hezbollah accused pro-government gunmen of Walid Jumblatt's Progressive Socialist Party of abducting three of its members and killing two of them. It said it held Jumblatt, a Druze leader, responsible for the safe return of the third.

SINIORA DEFIANT

Siniora said Beirut had been "besieged" and "occupied." "What is Hezbollah doing in the alleyways of Beirut?" he said in a televised address. "Your state will not fall under the control of the putschists."

The fate of Hezbollah's arsenal has been at the heart of the power struggle between the opposition and the governing coalition. "We ... can no longer accept Hezbollah's situation and that of its weapons as it is," Siniora said.

"Hezbollah must realize that force of arms will not scare us or make us retreat," he said.

The United States, which considers Hezbollah a terrorist group, a threat to Israel, and a weapon in the hands of Iran, said on Friday it was talking with other powers about taking measures against "those responsible for the violence."

Hariri's supporters still control areas in the north of the country where they have taken over several offices of opposition groups, and have kept a key crossing point with Syria in the Bekaa Valley shut.

Hariri is a son of the late Prime Minister Rafik al-Hariri, whose assassination three years ago triggered pressure on Syria to withdraw troops from Lebanon.

The governing coalition accuses Hezbollah of seeking to restore Syria's influence. The group's show of military might has also alarmed the West and its Sunni Arab allies who fear Iran's growing influence in the region.

Saudi Arabia and Egypt called for an Arab foreign ministers' meeting on Sunday. "There are regional repercussions at stake and the situation must be saved," Arab League chief Amr Moussa told al-Jazeera television.