* Rebel leader was making a recruiting run-army
* Athor's group says can not confirm his death
* Militia was seen as threat to new nation's stability (Adds Enough Project statement, background on Athor)
JUBA, Dec 20 (Reuters) - South Sudan's army said on Tuesday it had killed a prominent rebel leader near the border with the Democratic Republic of Congo, dealing a blow to insurgents who have threatened the security of the newly-independent nation.
South Sudan split away from Sudan in July under a peace deal that ended decades of civil war with Khartoum, but the young, oil-producing country has struggled with multiple armed uprisings.
George Athor, who left the south's Sudan People's Liberation Army (SPLA) saying the country's dominant party had rigged an election last year, was killed in Morobo County in South Sudan's Central Equatoria state, SPLA spokesman Philip Aguer said.
"George Athor was killed in Marobo County when he tried to enter South Sudan from Congo. He met with a clash with an SPLA patrol unit," Aguer said, adding that one SPLA soldier was killed and another wounded in the fighting.
Athor was returning to recruit more soldiers, Aguer said. He did not say when the clash took place.
The rebel leader was considered one of the biggest threats to South Sudan's stability, although reports have varied widely over the size of his force, which remained focused in remote border areas between Jonglei and the oil-producing Upper Nile.
South Sudan's army said in February Athor may have had around 2,000 men under his command, while Athor has claimed to lead a force of thousands capable of taking major centres across the country.
The army blamed forces aligned to Athor for an attack last month that killed nine people, including six civilians, in Jonglei - the site of an oil field controlled by France's Total .
South Sudan has accused Khartoum of flying in arms and cash for Athor's troops in an attempt to destabilise the country. Khartoum dismisses the charges.
The old civil war foes have regularly accused the other of backing rebel groups on either side of the tense and poorly-drawn border since South Sudan's independence, complicating talks over unresolved issues like debt and oil.
James Nuot Puot, a spokesman for Athor's group, said he could not confirm the reports of his commander's death. Calls to Athor's satellite phone were not answered.
John Prendergast, co-founder of the activist group Enough Project said Athor's reported death did not mean an end to South Sudan's divisions.
"Another Athor will emerge tomorrow unless real progress is made in providing political and economic opportunities" to groups that feel marginalised, he said in an emailed statement.
Aguer said he believed Athor's death would be a major blow to the rebel militia but they would likely continue to fight. "The rebellion will not end, but it will be weaker," he said.
About 2 million people died in Sudan's civil war, waged for all but a few years from 1955 to 2005 over oil, ideology, religion and ethnicity. (Reporting by Alexander Dziadosz and Ulf Laessing; Editing by Andrew Heavens)