WRAPUP 8-Libyan rebels say commander killed by allied militia
* Younes "killed by men sent to bring him to Benghazi"
* Assassination adds to West's worries about rebels
* Anti-Gaddafi forces claim towns near Tunisian border
(Recasts with rebel statement on killing)
By Rania El Gamal
BENGHAZI, Libya, July 29 (Reuters) - Libyan rebels said on Friday the gunmen who shot dead the rebel military chief were fighters of an allied militia, in apparent confirmation of deep rifts among the forces struggling to overthrow Muammar Gaddafi.
The reports follow 24 hours of confusion over the killing of Abdel Fattah Younes, a defector from Gaddafi's inner circle, whose death deals a blow both to the rebels and their Western backers.
There had been widespread speculation as to whether Younes had been killed in an internal rebel feud or by Gaddafi forces which had penetrated the Benghazi-based movement.
The killing of such a senior figure was a setback for the rebels as they were winning broader international recognition and launching an offensive in the west, and has deepened fears that divisions within the rebel camp will prolong the conflict.
Rebel minister Ali Tarhouni told reporters in Benghazi that an allied militia leader who had gone to fetch Younes from the front line had been arrested and had confessed that his subordinates had carried out the killing.
"It was not him. His lieutenants did it," Tarhouni said, without giving details about the militia. He added that the killers were still at large.
Rebel leader Mustafa Abdel Jalil said on Thursday Younes had been recalled for questioning to Benghazi but was killed before he arrived. Relatives said they retrieved a burned and bullet-riddled body.
CALLS FOR UNITY
The rebels have seized swathes of the country, but five months into the rebellion still appear far from ousting Gaddafi and remain poorly equipped.
Speculation about the assassination of Younes ranged widely. There were reports that he had been suspected of feeding the Gaddafi camp with information. One rebel commander said Islamists whom Younes had targeted in his job as interior minister may have been to blame.
The United States, which like some 30 other nations has formally recognised the opposition, said Younes's death was a blow but called for solidarity among the rebels.
"What's important is that they work both diligently and transparently to ensure the unity of the Libyan opposition," State Department spokesman Mark Toner said in Washington.
On Friday, weeping relatives and supporters brought Younes's coffin into the main square of Benghazi to mourn him, as fighters fired guns in the air.
Some family members vowed allegiance to the rebels' political leader. "A message to Mustafa Abdel Jalil: We will walk with you all the way," nephew Mohammed Younes told hundreds of mourners in the main square.
RUMOURS OF SECRET TALKS
Younes, from eastern Libya where the rebels are strongest, had been Gaddafi's interior minister but switched sides to become the military chief in the rebel Transitional National Council.
Rebel defence minister Omar Hariri, visiting the west, said Younes's death would have an impact on rebel fighters. "But they will recover, and there will be other leaders," he said.
Rebels took swathes of Libya soon after launching their uprising in February against Gaddafi's 41 years of domination of the oil-producing North African state, but have made few recent advances despite the support of NATO air strikes.
They said they had seized several towns in the Western Mountains on Thursday but are yet to make a major breakthrough.
A rebel commander near Ghezaia told Reuters on Friday that around 100 insurgents had taken control of the town, from which Gaddafi forces had dominated plains below the mountains.
Reuters could not go there to confirm the report as rebels said the area could be mined. But through binoculars from a rebel-held ridge near Nalut, reporters could see no sign of Gaddafi's forces in Ghezaia.
Fighters on the front line near the town of Misrata said they viewed Younes as a martyr and would avenge his death.
"It will be an extra motive for us in the fight against the tyrant," said Khaled al-Uwayyib.
With prospects fading for a negotiated settlement, the five-month-old civil war will grind on into the Muslim holy month of Ramadan in August.
Nick Witney, analyst at the European Council on Foreign Relations in Paris, said the West had hoped for a "nice simple conflict" with right prevailing, but this had ignored the nuanced, tribal nature of Libyan politics.
"It was a brave and right thing to do," he said. "But I feel we've lost the moral high ground a bit and wandered into something that will be prolonged and messy, but we're not in a position to sort out."
(Additional reporting by Michael Georgy near Ghezaia; Mussab Al-Khairalla in Misrata; Alexandria Sage in Paris; Samia Nakhoul, Avril Ormsby and Clare Kane in London and Missy Ryan in Tripoli; Joseph Nasr in Berlin; Hamid Ould Ahmed in Algiers; writing by David Lewis and Richard Meares; editing by Andrew Roche)