Castano is the most charismatic of the AUC's leaders

The United Self-Defence Forces of Colombia (AUC) said in a statement that its military command accepted Mr Castano's resignation on 30 May.

The move is thought to reflect internal divisions - some paramilitary leaders have reportedly been calling for retaliation against government attacks, but this has been opposed by Mr Castano.

The 8,000-strong AUC has been waging a violent campaign against the leftist Revolutionary Armed Forces of Colombia (FARC) and National Liberation Army (ELN).

A recent increase in activity led it to be included on a United States Government terrorism list last month.

Fears of split

Mr Castano, the most charismatic of the AUC's leaders, is believed to have been re-assigned to manage the its political affairs.

The AUC tell us the guerrillas are their reason for being. Why don't they give peace a chance?

President Pastrana

But there are concerns that his departure will splinter the movement, leading to further violence and making any possible peace deal with the leftists more difficult.

And in a separate development, Colombian President Andres Pastrana told the French news agency AFP that the AUC had declared his government a military target.

He urged the AUC to "give peace a chance", saying that the only reason for its existence was to fight the leftists.

President Pastrana: AUC made government a target

The AUC was formed by drug-traffickers and landowners to combat rebel kidnappings and extortion.

It was responsible for the majority of 250 massacres last year which claimed 1,200 lives.

Human rights groups have long alleged that the army maintains links to the paramilitaries and turns a blind eye to their violence.

But Washington has demanded action against the paramilitaries, which led to an army crackdown on the AUC last month.