* Iraq hosting first Arab League summit in two decades
* League members divided on how to handle Syria
* League expected to endorse Annan proposal, agreed by Assad
* New U.N.-backed plan does not stipulate that Assad must go
BAGHDAD, March 28 (Reuters) - Arab foreign ministers on Wednesday called for a U.N.-backed peace plan for Syria to be put into action after President Bashar al-Assad agreed to the proposal that urges an end to violence but does not demand the Syrian leader step down.
Arab leaders in Baghdad for an Arab League summit were expected to endorse the six-point proposal from U.N.-Arab League special envoy Kofi Annan, which seeks a ceasefire and political dialogue in what Iraq called a "last chance" for Syria.
Annan's proposal calls for the withdrawal of heavy weapons and troops from population centres, humanitarian assistance, the release of prisoners and free movement and access for journalists. But it does not hinge on Assad leaving office.
Arab states appeared to soften their initial proposal demanding that Assad step down after Russia and China vetoed U.N. draft resolutions condemning him.
"Syria's accepting the plan is a very important step," Iraq's Foreign Minister Hoshiyar Zebari told Reuters in Baghdad.
"This is the last chance for Syria and it must be implemented on the ground," he said.
The Annan proposal is the latest attempt to broker an end to more than a year of violence in Syria after Assad sent troops into cities to try to crush rebels seeking to end his 12-year rule.
Zebari said the League would discuss Annan's plan but would not accept any foreign intervention in Syria.
Damascus said it would reject initiatives made at the summit relating to Syria, according to the Lebanese TV channel al-Manar.
The Arab League suspended Syria last year and has in the past called on Assad to step aside to allow talks. But members are split over how to handle increasing violence that threatens to inflame the region's complex ethnic and sectarian mix.
Sunni powers Saudi Arabia and Qatar have led the push to isolate Syria, but other non-Gulf Arab states such as Algeria, Egypt and Iraq's Shi'ite-led government urge more caution, fearing that toppling Assad could spark sectarian violence.
But Baghdad has suggested the Annan plan as the best way to reach common ground for league members.
"The priority is to end the violence in Syria," said United Arab Emirates Minister of State for Foreign Affairs Anwar Qarqash in Baghdad. "We support Annan's proposal."
Iraq is holding its first Arab League summit in two decades and it will be the first such meeting hosted by a Shi'ite Arab leader, Prime Minister Nuri al-Maliki.
In the build-up to the summit, Baghdad courted Sunni Arab Gulf countries who have been wary of the rise of Iraq's Shi'ite majority and closer ties with Iran since the fall of Sunni dictator Saddam Hussein.
Syrian government forces continued heavy weapons fire and their seige against opposition strongholds on Wednesday with military action and shelling reported from the southern province of Deraa to the northern Hama region.
The United Nations says more than 9,000 people have been killed in Syria's upheaval though Syrian authorities blame foreign-backed terrorists for the violence and say 3,000 troops and police have been killed.
"We hope the Syrian brothers will respond to the Arab and international resolutions. We hope they will respond to the voice of reason and to stop the bloodshed," said Kuwaiti Foreign Minister Sheikh Sabah Khaled Al-Sabah.
"The situation now makes a ceasefire necessary."
ACTION NOT WORDS
Annan said on Tuesday that Syria had accepted the proposal but he acknowledged that resolving the crisis would be a "long difficult task" and violence continued with Assad's forces attacking rebels taking refuge across the border in Lebanon.
U.S. Secretary of State Hillary Clinton also greeted Syria's decision sceptically, saying Washington would judge Assad on his actions not on what he said, given his record of "over-promising, and under-delivering."
Western and Arab leaders are due to meet in Istanbul on April 1 to discuss a political transition, and U.S., Turkish and Arab officials are pushing the divided Syrian opposition to unite though they remain sharply split over how to form a post-Assad government.
While Western and Arab governments may be keen to see the end of a 40-year Assad family dynasty, they are wary of what kind of government might replace him.
Russia and China have so far shielded Assad from United Nations Security Council condemnation by vetoing Western-backed resolutions over the bloodshed. But they have backed the U.N. statement endorsing Annan's mission.
Syria's crisis has underscored a sharp split along sectarian lines in the Middle East, where Shi'ite power Iran and Sunni Arab Gulf rivals are jockeying for influence. Syria is Tehran's key ally in the Arab region.
The Assad family, from the minority Alawite sect, have ruled over Syria for 42 years, but the conflict now threatens to blow open the complex ethnic, religious and sectarian divides in Syria and across the region. *(Writing by Patrick Markey; Editing by Louise Ireland)