DIYARBAKIR, Turkey (Reuters) - Jailed Kurdish rebel leader Abdullah Ocalan called on Thursday for his fighters to halt hostilities and withdraw from Turkey as part of a peace process which marks the best hope yet of ending a conflict that has killed 40,000 people.

"Let guns be silenced and politics dominate," Ocalan said in a statement read by a Kurdish politician at Kurdish new year celebrations attended by a quarter of a million people.

"The stage has been reached where our armed forces should withdraw beyond the borders ... It's not the end, it's the start of a new era."

(Reporting by Ece Toksabay; Writing by Nick Tattersall and Daren Butler; Editing by Janet Lawrence)