* Meles was being treated for illness in Brussels
* Western ally in war against militant Islam
* Spurred economic growth but intolerant of dissent
* Deputy PM takes over as acting prime minister
By Aaron Maasho
ADDIS ABABA, Aug 21 (Reuters) - Thousands of Ethiopians descended on the centre of the capital Addis Ababa on Tuesday to mourn Prime Minister Meles Zenawi, their firm-handed ruler of more than two decades, whose body was flown home after his death in a Brussels hospital at 57.
Supporters mourned him as the saviour of a long-suffering nation and Washington praised its ally, but opponents hailed the death of an autocrat one group described as a "genocidal tyrant". Traffic was congested from the airport to his residence, where his body was to be put on display.
Meles, whose death ended months of rumour that he was gravely ill, had seized power 21 years ago from a military junta that had become notorious around the world for policies that contributed to mass starvation.
A former guerrilla leader turned economic reformer, he had presided in recent years over some of the fastest growth rates in Africa. But Ethiopia still remains one of the poorest countries on earth, and his opponents say his suppression of dissent held the country back.
In recent years he had become a close ally of the United States in fighting Islamic militants in East Africa, especially in neighbouring Somalia, which he twice invaded. The White House mourned his "untimely loss".
Deputy Prime Minister Hailemariam Desalegn will be sworn in as acting prime minister by parliament and the ruling party will meet to choose a successor but no date has been set.
Secretive to the end, Meles left it to officials of the European Union to disclose that he was being treated in the Belgian capital when he succumbed to an unspecified illness. Government spokesman Bereket Simon said only that he had been ailing for a year and died after being rushed to intensive care.
Since taking power in 1991 from Mengistu Haile Mariam's military junta, Meles became one of the central political figures on the continent.
Along with Uganda's Yoweri Museveni and Rwanda's Paul Kagame, he formed part of a generation of ex-guerrillas that came to power in the 1980s and 1990s after horrific ethnic civil wars, and brought economic improvements and relative peace that they said justified ruling with a firm hand.
"The death of Prime Minister Meles has robbed Africa of one of its greatest sons," the African Union, which is headquartered in the Ethiopian capital Addis Ababa, said in a statement.
Rights groups criticised him for cracking down hard on dissent but the West generally turned a blind eye to the repression, reluctant to pick a fight with a partner in the fight against al Qaeda-linked groups in Africa.
U.S. President Barack Obama offered condolences, praising Meles's commitment to the poor and calling it an "untimely loss" for Ethiopia; British Prime Minister David Cameron described Meles as an "inspirational spokesman for Africa".
An EU source said he had been a patient at the Saint-Luc University Hospital in Brussels.
His deputy Hailemariam said they had spoken only recently:
"He was recovering well, even taking part in light sporting activities. We were often in touch while he was recovering and we were optimistic that he would go on towards a full recovery," he said. "Meles was one of a kind. It is very difficult to replace a man of his stature."
In Brussels, a cortege accompanied by police outriders left a hotel next to the hospital, and took his casket to a private Belgian airstrip. Belgian military officials and police were there as it was loaded onto an Ethiopian Airlines jet.
Hours later in Addis Ababa, the coffin was carried out of the aircraft, draped in the green, gold and red national flag.
On the tarmac, a sister of Meles wept. "My brother loved this country. He deserved better," she said, a black scarf covering her tearful eyes.
Outside the airport's terminal, thousands of well-wishers huddled in the rain to pay their respects. Some carried placards reading: "Meles, your legacy will never die."
Meles presided over a seven-year run of double-digit economic growth, advocating a mixture of heavy state spending and private investment.
He was widely applauded for ploughing money into infrastructure but criticised by some for selling off swathes of land to foreigners. Many Ethiopians complain that his close business ties with China did not translate into more jobs.
International rights groups criticised Meles's handling of dissent. He rounded up numerous opposition leaders after a disputed 2005 election, and several opponents and journalists have been arrested under a 2009 anti-terrorism law.
Late last year, two Swedish journalists were jailed for 11 years for promoting the activities of a rebel group and entering Ethiopia illegally.
"Today is a day of joy for most Ethiopians and all freedom loving people around the world," opposition website Ethiopian Review said, describing Meles as a "genocidal tyrant".
Somalia's al Shabaab militants, who encountered Ethiopian troops twice under Meles' tenure, in 2006-2009 and again from December last year, were jubilant: "He led the African leaders who had fingers in Somalia for two decades, but all in vain," said al Shabaab spokesman Sheikh Ali Mohamud Rage.
Government spokesman Bereket said Ethiopia was stable and would continue on the path charted by Meles. The ruling party, the Ethiopian People's Revolutionary Democratic Front, will select his successor.
Negasso Gidada, who was president during Meles's tenure and now chairman of the opposition movement Unity for Democracy and Justice, said he hoped the transition would be peaceful.
"We urge the EPRDF to change for the good the political, democratic and human rights situation in the country," he said, referring to the ruling Ethiopian People's Revolutionary Democratic Front.
The U.S. State Department said it believed the transfer of power in Addis Ababa was under way and it did not anticipate any major policy changes from Meles' successor on the key issue of regional security.
"For internal security reasons, there will be a continuing focus on Somalia and I do not foresee any significant change towards Eritrea," said David Shinn, a former U.S. ambassador to Ethiopia.
Meles's rise to power coincided with Eritrea gaining independence from Ethiopia, and through much of Meles's rule the two countries were foes. They fought an all-out war from 1998-2000, and the border remains disputed, with each accusing the other of supporting rebel groups.
"What will happen to this problem, we leave to the incoming government of Ethiopia," Eritrean Foreign Minister Osman Salih Mohammed said in South Africa, describing Meles as having been "instrumental" in the crisis.
Former U.N. Secretary General Kofi Annan said Meles's death heralded a challenging time for Ethiopia.
"I ardently hope that the transition period will be smooth and peaceful and that Ethiopia sees leadership that reflects the aspirations of its people and realises the potential of this extraordinary country," Annan said in a statement.
State television said details of Meles's state funeral would be announced soon.
Acting Prime Minister Hailemariam, 47, was an adviser to Meles in 2006 before being picked as his deputy in 2010. He had also replaced Meles as chair of a number of parliamentary committees in the past few years, a sign that he was being groomed for the post, diplomats say.