DUBLIN, Jan 17 (Reuters) - Ian Paisley will retire as a member of the British parliament at the next general election but may well seek to see out his term as Northern Ireland's First Minister, The Irish Times reported on Thursday.

Paisley, 81, entered a groundbreaking power-sharing administration last year with Irish nationalist foes, ushering in a new era of political stability in the British province where three decades of conflict killed more than 3,600 people.

His pro-British Democratic Unionist Party (DUP) described the report as "unfounded press speculation".

Citing senior party sources, the newspaper said a majority of the party's lawmakers at Westminster believed he should also step down as party leader -- maybe as early as this summer -- so that a successor can prepare for the election.

British Prime Minister Gordon Brown does not have to call an election until 2010, but there is a growing sense it may be held as early as next year with his government under pressure over a series of blunders.

Paisley has been a member of London's Westminster legislature since 1970 and in 1971 set up the DUP to campaign for continued British sovereignty in Northern Ireland.

"There simply has to be a question about his capacity to continue doing the job," The Irish Times quoted one lawmaker as saying.

DUP deputy leader Peter Robinson, who is also Northern Ireland's finance minister, is tipped as the favourite to succeed him, the newspaper said.

Paisley, a firebrand Protestant cleric, said as recently as September that he planned to stay on as the province's first minister until the next regional assembly elections which will take place in May 2011 by which time he will be 85 years old.

The Irish Times said one possible scenario was for Paisley to step down as a member of the British parliament and as party leader while staying on as first minister.

Paisley's cordial relations with Deputy First Minister Martin McGuinness, a former commander in the Irish Republican Army which has long opposed British rule in Northern Ireland, has fed the desire for change in the DUP, the paper said.

The once bitter foes have been dubbed the "chuckle brothers" after a string of cheerful joint appearances that has raised ire among hardliners within Paisley's party.

Conflict in Northern Ireland largely ended with a 1998 peace deal but sporadic violence has continued despite the new power-sharing administration that came into being last May.

(Reporting by Jonathan Saul and Anne Cadwallader in Belfast)

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