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* Troops to gradually pull back from internal border
* President Talabani says local groups will take charge
* Build-up escalated after gunfight between Arabs and Kurds
By Suadad al-Salhy
BAGHDAD, Dec 13 (Reuters) - Iraq's government and autonomous Kurdistan on Thursday agreed to defuse a tense standoff between their troops by gradually withdrawing them from disputed territories along their internal border.
Baghdad's Arab-led central government and Kurdistan, embroiled in a dispute over oil and land, both dispatched troops last month in the second military build-up to threaten the country's fragile unity since U.S. troops left a year ago.
A statement from Iraq's President Jalal Talabani, a Kurd who has mediated in past political disputes, said both regions would withdraw troops once local police took over security in disputed areas, helped by local organizations representing ethnic groups.
"Security in these areas will be controlled and run locally by people there as well as local police. After the formation of these local groups, troops will be withdrawn," Prime Minister Nuri al Maliki's media advisor Ali al-Moussawi said.
The troop standoff underscored the depth of tensions between Baghdad and ethnic Kurds over regional autonomy, control of the country's oil wealth and contested land in the areas where both claim historical rights.
Their clash is raising questions about Baghdad's federal unity with Kurdistan, which already runs its own local government and armed forces. Kurds are straining against what they see as Baghdad's heavy-handed attempts to centralize power at the expense of autonomy.
In November, Kurdish forces and Iraqi army and police sent troops and armoured vehicles to reinforce positions around towns like the sensitive, ethnically mixed city of Kirkuk, which sits above some of the world's largest oil reserves.
Tensions spiralled into troop build-ups when Iraqi troops tried to search the office of a Kurdish political party in Tuz Khurmato, 170 km (100 miles) north of the capital, triggering a clash with Kurdish fighters in which a passerby was killed.
The Iraqi army and Kurdish troops have previously come close to confrontation only to pull back at the last moment. Politicians, diplomats and analysts said neither side had much taste for conflict but they hoped to gain political points to consolidate Arab and Kurdish support for upcoming elections.
Washington intervened to end a similar standoff in August near the Syrian border and U.S. officials were quickly in contact with Iraqi and Kurdish officials to try to ease tensions last month after the Tuz Khurmato clash.
Relations between Baghdad and Kurdistan have frayed further since the Kurdish region signed oil agreements with majors like Exxon Mobil and Chevron, deals it says are its constitutional right. The central government of the OPEC member state dismisses the agreements as illegal attempts to undermine its control over oil resources.
Map of northern Iraq: link.reuters.com/fuf54t Writing by Patrick Markey; editing by Adrew Roche