BOGOTA, Colombia -- Colombia's outlawed paramilitaries, blamed for some of the worst killings in a 38-year-old war, said on Thursday they no longer had control over all their fighters and that they were disbanding.

The break-up of the 10,000-strong united self-defense forces of Colombia -- known as "AUC" -- could lead to dozens of brutal right-wing bands roaming the lawless countryside with no unified command, intensifying violence in a war that claims the lives of thousands of people every year.

The AUC, a vigilante force that targets Marxist rebels and suspected civilian collaborators, is the fastest-growing illegal armed force in Colombia's three-way war, Reuters reported.

In a letter posted on the AUC's Web Site (www.colombialibre.org), paramilitary warlords said many of the group's fighters had turned to "anarchy" and are involved in drug trafficking, prompting them to dissolve the umbrella group.

"Our efforts to save the name and existence of the AUC ...

were unsuccessful. It was not possible because we encountered atomized groups highly involved in drug trafficking who in many cases went from the confederation to anarchy or lost their identity and principles," the letter said.

The document is signed by AUC founder Carlos Castano and commander Salvatore Mancuso, who said they would maintain leadership of fighters in a northern region while working to create a new, nationwide anti-rebel force loyal to its founding principles.

--- Autonomous Armed Groups --- Analyst Ricardo Franco, a former guerrilla commander, said the splintering of the AUC shows Colombia's war has entered a new and dangerous phase in which illegal armed groups funded by cocaine money are becoming more powerful and more autonomous.

"The war is increasingly out of control and armed groups have increasingly less control over their fighters," he told Reuters. Colombia's war pits leftist rebel groups against paramilitary vigilantes and state security forces.

Castano, a former army scout whose father was killed by rebels, created the AUC in 1997 as a loose confederation of regional anti-communist fighters.

Funded in part by wealthy cattle ranchers but growing fat in recent years thanks to cocaine money, the AUC is notorious for staging massacres of peasants and using cruel methods, including in some cases, chainsaws and hammers.

The break-up of the AUC into several regional blocks -- each with their own command and territorial control -- would complicate efforts to reach an eventual peace agreement with the paramilitaries. Castano, who has been trying to gain political respectability, has said he wants a place at future negotiations between the government and the Marxist-inspired revolutionary armed forces of Colombia, or "FARC."

Governments have tried to sign a peace deal with the 17,000-member FARC but have shunned talking to Castano and the AUC, which is branded a "terrorist" group by Washington.

Observers here say that any lasting agreement to end Colombia's war will have to include the paramilitaries.

Last week, Castano announced he was quitting as AUC's "political commander" in disgust at abuses by paramilitary members.

The most recent announcement on Thursday could be the next step in Castano's campaign to clean the paramilitaries' image.

President-elect Alvaro Uribe, who takes office Aug. 7, plans to boost military spending to restore law and order.