*Mutineers begin to lay down arms

*Government offers amnesty

*Five killed when pay/command dispute turns violent

(Updates after rebel troops lay down arms)

By Anis Ahmed and Nizam Ahmed

DHAKA, Feb 25 (Reuters) - Mutinous members of a Bangladesh paramilitary unit began laying down their arms after accepting an amnesty offered by the government, a government minister told reporters.

The mutiny erupted on Wednesday morning when at least five people were killed in shooting that broke out after enlisted men of the Bangladesh Rifles (BDR) met officers to discuss a dispute over pay and the command structure.

The government responded by sending troops to the BDR complex, and Home Minister Sahara Khatun held two rounds of talks with the mutineers' leaders to defuse the tense situation, after which the troops agreed to lay down their weapons.

"They (mutinous troops) have started laying down their arms," State Minister Jahangir Kabir Nanak told reporters after speaking by telephone with Sahara, who was at the BDR headquarters overseeing the weapons surrender.

Police said five people were killed during the clashes, one a colonel and one a lieutenant colonel.

Doctors at a Dhaka hospital said they had received the bodies of five people and had treated 15 people wounded in the bursts of shooting, which sent civilians fleeing and led to a stand-off with troops and police.

One BDR mutineer said 15 people were killed.

The shooting spilled over into the streets, killing three civilians and wounding several others, witnesses said. Flames rose from the BDR complex and big blasts were heard.

The firing had subsided by late afternoon but resumed intermittently later, and witnesses said the streets around the complex were deserted.

Bangladesh, an impoverished South Asian country of more than 140 million people, has undergone several military coups since independence in 1971, but Wednesday's fighting did not appear to be politically motivated.

Prime Minister Sheikh Hasina, whose party won elections in December to take over from a military-backed interim government, met some of the BDR mutineers during the day in a bid to end the stand-off.

Government minister Jahangir Kabir Nanak said Hasina offered an amnesty to those involved during an hour-long meeting at her residence. One BDR officer said the rebels agreed to surrender their weapons after Hasina promised to meet the group's demands.

Commercial NTV television showed several bodies lying on the ground near the BDR complex and said as many as 15 people, mostly soldiers, may have been killed. There was no official confirmation of that number.

Police said they had recovered the bodies of two members of the BDR from a canal near the unit's headquarters.

Around 2,000 BDR soldiers are usually stationed in the headquarters but it was not known how many joined the fighting. About 500 army troops and hundreds of police and other security forces were deployed to confront the mutineers.

A commercial television station showed one masked rebel shouting from a window in the complex. "We want BDR to be commanded by themselves, not by the army," the rebel shouted.The army supplies officers to command the paramilitary BDR troops.

The BDR, whose main duty is guarding the country's borders, is often called in to back up the army and police in meeting other defence and security requirements.

The mutiny broke out only a day after Hasina met senior BDR officers at an annual parade and told them her government would do its best to modernise the paramilitary forces. (Additional reporting by Rafiqur Rahman, Serajul Islam Quadir, Ruma Paul and Azad Majumder; editing by Tim Pearce)

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