By Tom Gibb BBC News, Sao Paulo

Lula had been under pressure to sign the decree

The reserve, Raposa Serra Do Sol, is called "the land of the fox and mountain of the sun" by the 12,000 Indians who live there.

Its hills, rivers and forests cover 17,000 sq km (6,500 square miles).

The move follows 30 years of campaigns by the Indians, which led to bitter conflicts with settlers and farmers.

During that time, human rights groups say at least a dozen Indians were killed in conflicts with miners and settlers.

Parts of the reserve, in the northern state of Roraima, are now planted with rice or grazed by cattle.

Indian protests

The decree for demarcation - the last step in a long process - has been sitting on the Brazilian president's desk for a couple of years.

Whenever he has looked like signing, it has provoked fierce protests against the reserve from settlers and local politicians.

Justice Minister Tomas Bastos said that over the next year, farmers inside the reserve would be moved to alternative land.

Only roads, a frontier military base, and a small town inside the area have been excluded from the reserve.

Lula, as the president is known, will be hoping the decree will head off anti-government protests planned for next week by Indian groups.