BAGHDAD, March 1 (Reuters) - Tribal security guards patrolling one of Iraq's most dangerous provinces agreed to return to work on Saturday after a three-week strike, one of their leaders and the U.S. military said.

Hundreds of the mainly Sunni Muslim guards had been on strike in Diyala over pay and objections to the province's Shi'ite police chief, the U.S. military said.

The neighbourhood guard units, which the U.S. military calls "concerned local citizens" (CLCs), have been credited as vital to a sharp drop in violence across Iraq since last June.

The strike had threatened to undermine efforts to pacify ethnically and religiously mixed Diyala, northeast of Baghdad, one of four northern provinces in which officials said al Qaeda had regrouped after being forced from strongholds in Iraq's west and around the capital.

A leader for the Diyala tribal guards had said that thousands in the movement had disbanded, primarily because they wanted the police chief fired.

Provincial CLC and Iraqi officials and the U.S. military met on Friday to iron out differences.

"We will reopen our bases and have a party tonight," Abu Talib, a CLC leader in Diyala, told Reuters on Saturday.

Major Mike Garcia, a U.S. military spokesman in Diyala, told reporters in an e-mail late on Friday that all the CLCs would return to work on Saturday.

The CLC units, which man checkpoints in their own neighbourhoods, began in western Anbar province in 2006 after Sunni Arab tribal sheikhs turned against al Qaeda because of its indiscriminate killings and strict interpretation of Islam.

They have since grown across Iraq to now number about 80,000, roughly 80 percent Sunni and 20 percent Shi'ite.

The U.S. military has been keen to encourage them -- despite reticence from Iraqi officials wary of armed groups whose ranks include some former insurgents -- and say they play an important role in helping to improve security.

The aim is to recruit about 20 percent of them into Iraq's national police and army, but critics fear the U.S. military is paying men who will later become just another militia that turns on U.S. and Iraqi security forces.

Officials say there has been a 63 percent drop in violence in Diyala since June, when U.S. and Iraqi forces launched an offensive against Sunni Islamist al Qaeda in the province, but violence had not risen during the CLC strike, Garcia said. (Reporting by Mohammed Abbas; Editing by Caroline Drees)

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