Jailed Kurdish rebel chief Abdullah Ocalan called Thursday for a new ceasefire, telling his fighters to lay down their arms and withdraw from Turkish soil, raising hopes for an end to a three-decade conflict that has cost tens of thousands of lives.

"We are at a stage where guns should be silenced," Ocalan said in a letter written from his isolated island prison cell and read out by a pro-Kurdish lawmaker to hundreds of thousands gathered in the mainly Kurdish southeastern city of Diyarbakir.

Prime Minister Recep Tayyip Erdogan responded cautiously to the much-anticipated announcement by saying Turkey would end military operations against Ocalan's outlawed Kurdistan Workers' Party (PKK) if militants halt their attacks.

"If there are no more armed actions our troops will not undertake armed actions," Erdogan told journalists during a visit to the Netherlands, saying he hoped the truce call would have an immediate impact but calling for more than just words.

Ocalan, the founding leader of the PKK, said it was time for "politics to prevail, not arms," as he called for armed militants -- who have for years used rear bases in Iraq to launch their attacks -- to withdraw from Turkish soil.

The move caps months of clandestine peace talks between Turkey's spy agency and the state's former nemesis Ocalan, whose movement is blacklisted as a terror group by Ankara and its Western allies.

Ocalan's announcement was timed to coincide with Kurdish New Year, or Newroz, which saw revellers from across Turkey gathering for mass celebrations in Diyarbakir, turning the city's sun-drenched main square into a sea of red, yellow and green -- the colours of the Kurdish flag.

As the rebel leader's words were read out, thousands waved banners bearing his portrait, chanting: "In peace as in war, we are with you, chief!"

"This is a historic day for Kurds, for Turkey and for the world," said Nusrettin Pudak, a pensioner from Diyarbakir. "When Ocalan says something, we are 100 percent behind him."

Ocalan, 64, is known as "Apo" or uncle to Kurds. He has been serving a life sentence for treason on Imrali island off Istanbul since 1999.

At least four previous ceasefire attempts called by Ocalan were rejected by Ankara or torpedoed by hawkish rebel groups, triggering increased unrest.

Erdogan and Ocalan, branded a "baby killer" by many Turks, both appear to have staked their political futures on the renewed push to end the 29-year armed campaign for self-rule that has killed some 45,000 people, mostly Kurds.

The latest round of peace talks was launched last year after a dramatic upsurge in PKK attacks against Turkish security forces.

"I find it a positive approach, but it is important how it will be applied in reality," said Erdogan, voicing criticism that no Turkish flag was raised at the Diyarbakir rally.

The leader of the Islamist-rooted AKP party has in the past said he was "ready to drink poison" for peace, in the face of charges by the nationalist opposition that he was guilty of "treason" for negotiating with "a bunch of bloody bandits".

Top rebel commander Murat Karayilan, Ocalan's influential number two, was quoted by a pro-Kurdish news agency as saying the fighters would abide by the truce call but added: "Everyone should know the PKK is as ready for peace as it is for war."

The ceasefire call is likely to be in return for wider constitutional rights for the up to 15 million Kurds in Turkey. The PKK also wants to see the release of thousands detained over links to the banned movement, and safe passage for fighters withdrawing into northern Iraq.

But 64-year-old Ocalan did not give a timetable for withdrawal or make specific demands of Ankara, disappointing some supporters.

"We expected more from this message," pharmacist Necati Alpay told AFP.

The truce will likely be a crucial test for Ocalan's influence over the PKK after years of being cut off from the outside world, although it is not clear that there would be any move for his release.

In a gesture of goodwill, the PKK last week freed eight Turkish prisoners it had been holding hostage for some two years.

Under Erdogan, who has been in power since 2002, the Kurdish minority has been granted more cultural and language rights but further reforms were dropped in the face of a nationalist backlash.

Rights group Amnesty International called on the Turkish government to "seize the opportunity" created by Ocalan's truce call "and work for a lasting peace".