By Aaron Maasho

ADDIS ABABA Aug 5 (Reuters) - Two protesters died in clashes with police in Ethiopia's ancient city of Gonder on Friday, campaigners said, as anger mounted over the status of a disputed territory - a highly-charged issue in a nation made up of a patchwork of ethnic groups.

Violence broke out as police brought one of the leaders of a land campaign movement to court, according to one person who said he had been in the crowd and asked to remain anonymous.

Amhara region president Gedu Andargachew did not mention any deaths but told journalists the protests were illegal and said security services would take measures against anyone who took part.

Any sign of unrest is closely watched in Ethiopia, a major Western ally against Islamist militants in neighbouring Somalia and an economic power seen as a centre of relative stability in a fragile region.

"Two protesters were shot and killed in Piassa," said one campaigner by phone, referring to a central district in the city.

Clashes carried on into the evening, said another, a rare public protest in a country whose government has been accused of cracking down on dissent. Roads were blocked and access to social media limited, he added.

Tensions have been rumbling for around 25 years over the status of Wolkayt district - a stretch of land that protesters from Amhara say was illegally incorporated into the neighbouring Tigray region to the north.

The issue boiled over into violence two weeks ago when crowds came out in Gonder saying they were protesting against an attempt to arrest Wolkayt campaigners.

Government spokesman Getachew Reda said at the time six policemen were killed by the protesters and accused an "illegal committee" of stoking ethnic untest.

The dispute, while centred on a relatively small patch of land, is particularly sensitive because it challenges a division of Ethiopia along ethnic and linguistic lines, imposed by the core of the current ruling EPRDF coalition when it came to power in 1991.

After toppling Mengistu Haile Mariam's Marxist military dictatorship, the former rebels set up the boundaries that they said would recognise the country's different groups and prevent any one from dominating the others through a system of so-called ethnic federalism.

Protesters in Gonder - known as Africa's Camelot because of its ancient castles - say they had finally decided to take to the streets because they had got nowhere with years of petitioning senior officials, arguing that the Amharic-speaking people of Wolkayt belonged in Amhara.

The protests in the region come in the wake of months of unrest in the central Oromiya province, where demonstrators objected to having land incorporated into the boundaries of the capital Addis Ababa.

The government was subsequently forced to scrap that plan. (Reporting by Aaron Maasho; Editing by Andrew Heavens)