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By Susan Cornwell

WASHINGTON, Aug 7 (Reuters) - The United States and Russia have agreed to work jointly to end fighting in Georgia's breakaway South Ossetia region, which Washington believes South Ossetia started, the top U.S. diplomat for Europe said on Thursday.

Assistant Secretary of State Dan Fried said in an interview with Reuters that he had spoken with Russian Deputy Foreign Minister Grigory Karasin by telephone, and "we both agreed to work together to get the fighting stopped in South Ossetia, and encourage political dialogue."

After he spoke, Russian peacekeepers said Georgia and South Ossetian separatists had agreed on a cease-fire until talks are held, according to Interfax news agency. RIA news agency quoted a Russian envoy as saying the talks would be on Friday.

"It appears that the South Ossetians have instigated this uptick in violence," Fried said. "We have urged the Russians to urge their South Ossetian friends to pull back and show greater restraint. And we believe that the Russians ... are trying to do just that."

The United States urged talks to end the crisis.

"We call for an immediate end to the violence and direct talks between the parties," State Department spokesman Gonzalo Gallegos told reporters.

Georgian President Mikheil Saakashvili had called earlier for a cease-fire after days of fighting raised fears of new war in the Caucasus.

Georgia's breakaway regions of South Ossetia and Abkhazia enjoy the political and financial backing of Russia, but ex-Soviet Georgia has allied itself with the West and is pushing for membership of NATO. It lies at the heart of a region emerging as a vital energy transit route.

Fried said he had also spoken by telephone with Georgian Foreign Minister Eka Tkeshelashvili.

"We're urging the Georgians to exercise restraint, but it seems the South Ossetians are the provocative party," he said.

Fried said he did not think the Russians had encouraged the South Ossetians to spur unrest. "There's no evidence that the Russians are pushing them," he said.

Besides the prospective Russian-brokered talks, other possible avenues for dialogue include the Organization for Security and Cooperation in Europe or a "Friends of Georgia" organization led by Germany, which is trying to launch a dialogue going over Abkhazia, he said. That group also involves Russia, France, Britain and the United States, he said.

"We cannot sit idly by and watch the situation deteriorate. We need to intensify our diplomatic efforts ... and we hope we have a good Russian partner in a common effort, working with our European allies," he said.

(Editing by Randall Mikkelsen and David Wiessler)

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