(adds Soro comment, reaction, background)

By Loucoumane Coulibaly and Ange Aboa

ABIDJAN, March 29 (Reuters) - Ivory Coast President Laurent Gbagbo named rebel leader Guillaume Soro as prime minister on Thursday in a major step towards implementing a peace deal to reunite the West African nation.

Gbagbo and Soro, leader of the New Forces rebels who seized the north of Ivory Coast in a brief 2002-2003 civil war, signed an agreement three weeks ago in Burkina Faso to guide the world's largest cocoa producer towards elections within 10 months.

"Today I came to see the president and receive the nomination," Soro told journalists at the presidential palace.

"I want to salute all Ivorians, all those who have worked for a peace process to give hope to all Ivorians."

The home-grown accord, which came after a series of foreign-backed deals had foundered, envisaged a new transitional government by April 8 to replace the U.N.-backed administration of Prime Minister Charles Konan Banny.

Discussions were underway to determine the composition of the cabinet, presidential officials said. Soro said he would address the nation in the coming days.

The peace process has already led to the creation of a joint army command to demobilise militia fighters.

The accord, signed on March 4 in the Burkinabe capital Ouagadougou with the mediation of President Blaise Compaore, foresees the dismantling of a U.N.-manned buffer zone between the two warring factions and the withdrawal of French troops.

RELIEF

Soro's appointment was welcomed on the streets of Ivory Coast's commercial capital Abidjan, where five years of strife have disrupted the once-thriving economic life of Francophone West Africa's most prosperous city.

"I am very happy. I think the crisis will end with Soro's nomination as prime minister," said Paul N'Zi, a worker in the Yopougon industrial estate.

"In the villages, they say when you give your child to the sorcerer, he can no longer kill him. Soro can no longer rebel against Gbagbo."

By accepting the premiership, Soro effectively rules himself out of contesting the presidential election in 10 months under the terms of a series of U.N.-backed peace deals.

Analysts regarded the alliance as a blow to the centre-right opposition led by former Prime Minister Alassane Ouattara and ex-President Konan Bedie.

"The deal alters the political dynamics for anticipated elections later this year, making it more likely now that embattled President Laurent Gbagbo may win re-election," wrote Eurasia Group analyst Sebastian Spio-Garbrah in a research note.

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