* Neighbours fear full-blown civil war in South Sudan
* Conflict divides South Sudan on ethnic lines (Adds Kenyatta call for aid corridor and U.N. figures for number of displaced civilians)
By Richard Lough and Carl Odera
NAIROBI/JUBA, Dec 27 (Reuters) - South Sudan's neighbours threw their weight behind President Salva Kiir on Friday in an ethnic-based conflict ravaging the world's newest country, saying they would not accept any bid to overthrow his democratically elected government.
Kiir also received a boost in Malakal, capital of South Sudan's major oil-producing state of Upper Nile, where government forces said they had defeated rebels loyal to Kiir's former deputy Riek Machar after four days of intense fighting.
A cabinet minister told Reuters Kiir's government was now ready for an immediate ceasefire - but no one was immediately available from Machar's side to comment on the offer, or the report from Malakal.
Machar has previously said he would only agree to talks if Kiir released his allies held in detention.
Addressing a special summit of the Inter Governmental Authority on Development (IGAD), an east African regional body, Kenyan President Uhuru Kenyatta urged Kiir and Machar to seize "the small window of opportunity" and start peace talks.
"Let it be known that we in IGAD will not accept the unconstitutional overthrow of a duly and democratically elected government in South Sudan. Violence has never provided optimum solutions," Kenyatta said in a statement.
The violence erupted in South Sudan on Dec. 15 and quickly spread, dividing the landlocked country of 10.8 million along ethnic lines, largely between the Nuer - Machar's people - and the Dinka, to whom Kiir belongs.
Western powers and regional governments fear the bloodletting could lead to a civil war, threatening a fragile region with notoriously porous borders.
The regional leaders called for a creation of an "aid corridor" to help badly-needed supplies reach remote areas.
The United Nations, which is sending extra peacekeepers to South Sudan, said about 121,600 people have been displaced during the 13 days of fighting, including 63,000 civilians who had sought refuge in its bases.
The army said it had taken back full control of Malakal, the administrative centre of Upper Nile, a state which currently supplies all of South Sudan's crude, after fighting shut down oilfields in other areas.
"(Government forces) are 100 percent in control of Malakal town and are pursuing the forces of the coup," army spokesman Philip Aguer said by phone in South Sudan's capital Juba.
Cabinet Affairs Minister Martin Elia Lomuro told Reuters the government was ready for a ceasefire. "The cessation of hostilities is to temporarily stop the mayhem, to not attack so we move on confidently (to peace talks)," he said.
Machar served as vice president of South Sudan until Kiir sacked him in July. Kiir accused him of trying to start a coup when the fighting between rival groups of soldiers started in Juba - a charge Machar denied.
Kenyatta said South Sudan and regional governments had to move quickly to resolve what he called a political problem within the ruling Sudan People's Liberation Movement (SPLM) party which had degenerated into a violent confrontation.
"The present crisis, if not contained, will produce millions of internally displaced persons and refugees and set back this region immeasurably," Kenyatta told the regional leaders.
The head of the U.N. mission in Sudan has said well over 1,000 people have already been killed.
South Sudan seceded from Sudan in 2011 under a peace agreement to end decades of war with the Khartoum government in the north. That conflict also saw fighting between southern factions, including one splinter group led by Machar. (Writing by Drazen Jorgic; Editing by Andrew Heavens)