A row over the 2007 poll, which Odinga challenged after being declared loser, was followed by weeks of ethnic bloodshed in which more than 1,200 were killed
* Kenya has history of disputed elections
* Kenyatta calls for calm, respect for court ruling
* Opposition leader Odinga hails "historic" decision
* More than 1,200 killed in violence after 2007 vote (Adds opposition comment, graphic on economy)
By Maggie Fick and George Obulutsa
NAIROBI, Sept 1 (Reuters) - Kenya's Supreme Court on Friday nullified President Uhuru Kenyatta's election win, citing irregularities, and ordered a new poll within 60 days, an unprecedented move in Africa where governments often hold sway over judges.
The ruling, broadcast to a stunned nation on television, sets up a new race between Kenyatta, 55, and veteran opponent Raila Odinga, 72.
Kenyatta called for calm and respect for the ruling and said he would run again in a televised speech. But he later struck a more combative note, criticising the court for ignoring the will of the people and dismissing the chief justice's colleagues as "wakora" (crooks).
In Odinga's western heartland, cheering supporters paraded through the streets chanting and waving tree branches.
Kenya, a U.S. ally in the fight against Islamists and a trade gateway to East Africa, has a history of disputed votes.
A row over a 2007 poll, which Odinga challenged after being declared loser, was followed by weeks of ethnic bloodshed that killed more than 1,200 people. Kenya's economy, the biggest in the region, slid into recession and neighbouring economies wobbled.
Chief Justice David Maraga announced the Supreme Court's verdict that was backed by four of the six judges, saying the declaration of Kenyatta's victory was "invalid, null and void". Details of the ruling will be released within 21 days.
In the court room, a grinning Odinga pumped his fist in the air. Outside, shares plummeted on the Nairobi bourse amid the uncertainty, while Kenyatta's supporters grumbled. But the mood on the streets of the capital was jubilant rather than angry.
Judges said they found no misconduct by Kenyatta but said the election board "failed, neglected or refused to conduct the presidential election in a manner consistent with the dictates of the constitution."
THE POWER OF JUDGES
Kenya's judiciary went through sweeping changes after the 2007 election violence in a bid to restore confidence the legal system. Friday's ruling is likely to galvanise pro-democracy campaigners across Africa, where many complain their judiciaries simply rubber stamp presidential rule.
"This is a monumental and unprecedented decision, very remarkable and courageous that will be watched carefully with keen interest across the continent," said Comfort Ero, the head of the Africa programme for the Crisis Group think-tank.
Kenyatta struck a conciliatory note in his televised address.
"The court has made its decision. We respect it. We don't agree with it. And again, I say peace ... peace, peace, peace," he told the nation. "That is the nature of democracy."
But later he criticised the court, telling a rally at a Nairobi market: "Earlier, I was the president-elect. (Chief Justice) Maraga and his people those wakora (crooks) have said 'let that election get lost' ... Let Maraga know he is dealing with the incumbent president." He spoke in kiswahili.
Official results had given Kenyatta 54.3 percent of the vote, compared to Odinga's 44.7 percent, a lead of 1.4 million votes. Kenyatta's ruling party also swept the legislature. Those results triggered angry protests and at least 28 people died in the police clamp-down that followed.
"For the first time in history of African democratisation a ruling has been made by a court nullifying irregular elections for the president," Odinga said outside the court.
Later, he called for the commission to resign and face criminal prosecution.
International observers, including former U.S. Secretary of State John Kerry, had said they saw no manipulation of voting and tallying at polling stations. But the election board was slow posting forms showing polling station results online.
Thousands were missing when official results were declared, so opponents could not check totals. Court experts said some documents lacked official stamps or had figures that did not match official tallies.
The chairman of the election board said there would be personnel changes, but it was not clear if that would be enough for the opposition. Sweeping out the whole board would complicate efforts to hold a new poll within two months.
DEMOCRATIC CREDENTIALS
In a nation of more than 40 ethnic groups, tribal loyalties often trump policy at election time. Kenyatta's Kikuyu is the biggest of Kenya's tribes but still a minority. Odinga is a Luo.
Odinga's strongholds include his ethnic heartland in the west; the coast, where many of the nation's Muslims live; and the urban slums. Residents of all three areas feel neglected by central government.
Kenyatta, whose Kikuyu tribe has produced three out of Kenya's four presidents, has his main support base in the central region.
Kenyatta and Odinga are both scions of political families. Kenyatta's father, Jomo Kenyatta, was the nation's founding president and had a long-running rivalry with Odinga's father. Oginga Odinga was originally Kenyatta's deputy but eventually left the government to unsuccessfully contest the presidency.
Raila Odinga has contested the last three elections and lost each time. After each one, he claimed the votes were marred by rigging. In 2013, the Supreme Court dismissed his petition.
This time, his team focused on proving the process for tallying and transmitting results was flawed, rather than proving how much of the vote was rigged.
Residents in the western city of Kisumu, where Odinga has strong backing, cheered and motorcycle drivers hooted their horns. "Today is a special today and I will celebrate until I am worn out," said 32-year-old Kevin Ouma.
In the eastern Rift Valley town of Kinangop, a stronghold for the ruling party, small groups gathered and complained.
"Over 8 million people supported the election of Uhuru Kenyatta but the Supreme Court has ignored this in the ruling which is very shameful," said Matheri Wa Hungu.
Kenyan shares, which rallied after Kenyatta was declared winner, tumbled by 3.5 percent on Friday and prompted the authorities to suspend trading for half an hour. The shilling fell by 0.4 percent and Kenya's dollar bonds fell.
But although analysts said there was likely to be short-term volatility, the ruling could be a long-term win for Kenya.
"The population's lack of faith in the system is one of the reasons why politics often descends into violence," said Emma Gordon, a senior analyst at risk analysis firm Verisk Maplecroft .
"While this decision cements the view that the (election board) was biased, it demonstrates that independent checks and balances do exist."
(Additional reporting by Katharine Houreld, Duncan Miriri, Humphrey Malalo and John Ndiso in Nairobi and Antony Gitonga in Naivasha; Writing by Katharine Houreld and Edmund Blair; Editing by Janet Lawrence and Andrew Heavens)
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