Ethiopia, which has long been seen by the West as a bulwark against Muslim rebels in neighboring Somalia, says it fears militant Islam is taking root in the country.

However, the U.S. Commission on International Religious Freedom (USCIRF) accused the government of arresting peaceful Muslim protesters, noting that 29 of them had been charged last month with what the authorities said was "planning to commit terrorist acts".

Ethiopian Muslims, who make up about a third of the population in the majority Christian country, accuse the government of interfering in the highest Muslim affairs body, the Ethiopia Islamic Affairs Supreme Council (EIASC). Thousands of Muslims have staged weekly mosque sit-ins and street protests in Addis Ababa over the past year.

"The arrests, terrorism charges and takeover of EIASC signify a troubling escalation in the government's attempts to control Ethiopia's Muslim community and provide further evidence of a decline in religious freedom in Ethiopia," the Commission said in a statement issued on Thursday.

Ethiopian officials were unavailable for comment on the statement from the Commission, whose members are appointed by President Barack Obama and senior Congressional Democrats and Republicans.

Commission Chairwoman Katrina Lantos Swett called on the U.S. government to raise the issue with Addis Ababa.

"USCIRF has found that repressing religious communities in the name of countering extremism leads to more extremism, greater instability, and possibly violence," she said.

"Given Ethiopia's strategic importance in the Horn of Africa ... it is vital that the Ethiopian government end its religious freedom abuses and allow Muslims to practice peacefully their faith as they see fit," she added. "Otherwise the government's current policies and practices will lead to greater destabilization of an already volatile region."

Over the past six years Ethiopia has twice sent troops into Somalia to battle Islamist rebels, including al Shaabab militants, and officials say some of the protesters are bankrolled by Islamist groups in the Middle East.

The Commission backed the protesters' complaints that the government had been trying since last year to impose the apolitical Al Ahbash sect on Ethiopian Muslims. The government has denied this but dozens of Muslims have been arrested since the demonstrations started in 2011.

Ethiopia is 63 percent Christian and 34 percent Muslim, according to official figures, with the vast majority of Muslims adhering to the moderate, Sufi version of Islam.

(Editing by Drazen Jorgic and David Stamp)