* Rebels say ready to demobilise troops after string of defeats
* U.S. special envoy hails significant step toward peace
* Kinshasa says ready to sign deal with M23 in coming days
* Attention will shift to dozens of smaller armed groups
By Kenny Katombe
TSHANZU, Democratic Republic of Congo, Nov 5 (Reuters) - D emocratic Republic of Congo's M23 rebel group on Tuesday called an end to a 20-month revolt after the army captured its last hilltop strongholds, raising hopes for peace in a region where millions have died in nearly two decades of violence.
The M23 announced it would disarm and pursue political talks hours after government forces drove the rebels out of the villages of Tshanzu and Runyoni before dawn. A two-week U.N.-backed offensive had cornered the insurgents in the lush hills along the border with Uganda and Rwanda.
"The chief of staff and the commanders of all major units are requested to prepare troops for disarmament, demobilisation and reintegration on terms to be agreed with the government of Congo," M23 leader Bertrand Bisimwa said in a statement.
The United States welcomed the declaration as a "significant positive step" for eastern Congo. Millions of people have died from violence, disease and hunger since the 1990s as foreign-backed insurgents have waged a series of rebellions, often for control of the region's rich deposits of gold, diamonds and tin.
M23's defeat appeared to vindicate the United Nations' deployment of a tough new Intervention Brigade this year. But, with dozens of rebel groups still active, pacifying the mineral-rich region at Africa's heart remains a daunting task.
The M23 is just the latest manifestation of simmering anger with Kinshasa among ethnic Tutsis in eastern Congo. The real test will be whether government and rebels can reach a lasting political deal. M23 took up arms last year when a previous 2009 peace accord with the Tutsi-led CNDP rebels unravelled.
In the distant capital, Kinshasa, thousands of women dressed in white marched down the central boulevard to parliament chanting songs praising Kabila and the army.
Lambert Mende, a spokesman for Kabila's government, said it would sign an accord in the coming days in the Ugandan capital Kampala, where peace talks have been taking place for months.
"Militarily, this is finished," Mende said, noting that many M23 fighters had surrendered to army troops. M23's military commander Sultani Makenga and his commanders had deserted their positions in Tshanzu, setting fire to munitions depots and military trucks before fleeing into forests, he added.
KABILA RIDING HIGH
M23's defeat marked a dramatic turnaround for 42-year-old Kabila. A year ago, his presidency was in tatters after M23 swept aside U.N. peacekeepers and the army to capture Goma, the largest town in eastern Congo.
That defeat led to the deployment of the new U.N. Intervention Brigade, an overhaul of the Congolese army, and increased diplomatic pressure on neighbouring Rwanda not to meddle in the conflict, changing the tide of events. M23 has since been riven by defections and factional in-fighting.
Martin Kobler, head of a 19,850-member U.N. mission in Congo (MONUSCO), said attention would now turn to the remaining armed groups, including the Rwandan Hutu FDLR and Uganda's ADF-NALU.
"We have teeth and we are using those teeth," Kobler said in Pretoria, referring to the 3,000-strong Intervention Brigade.
Russell Feingold, U.S. special envoy to the Great Lakes region, said the issues of an amnesty and reintegration of rebels into the army were vital to ensuring a durable peace.
"In a region that has suffered so much, this is obviously a significant positive step in the right direction," he said.
Feingold voiced confidence that Rwanda, accused by U.N. experts of backing the M23, now wanted to see an end to the insurgency. The United States suspended military aid this year to Rwanda, which has repeatedly denied backing the rebels.
The U.N. special envoy to the region Mary Robinson issued a joint statement with Feingold and Kobler calling for swift disarmament of the M23 and accountability for perpetrators of war crimes and crimes against humanity. Analysts say M23's military leader Makenga was among those unlikely to benefit from any amnesty.
"The military victories over the M23 will send a very strong message to the many other armed groups operating in the east," said Stephanie Wolters of the Institute of Strategic Studies in Pretoria. "It may prompt them to consider the advantages of a negotiated solution over a drawn-out military campaign."
The Rwandan Hutu FDLR, which analysts say numbers more than 1,500 fighters paid for by illegal mining and logging, will likely be the priority for Congo's army and U.N. troops.
The FDLR includes some Hutus who fled Rwanda after the 1994 genocide of 800,000 Tutsi and moderate Hutus. Its presence in Congo has long been used by Kigali as a pretext for intervening.