Officials said Sheikh Hassan Dahir Aweys - designated a "terrorist" by the US - had been chosen to lead the Council of Islamic Courts (CIC).

The body will serve as a "parliament" in areas under the Islamists control.

Aweys founded Mogadishu's first Islamic court and is believed to be a key figure in the Islamists victory over warlords who had controlled the capital for 15 years.

His suspected al-Qaeda links were a key reason Washington backed the Alliance for the Restoration of Peace and Counter-Terrorism  (ARPCT), which was formed in February by warlords who say the Islamists are harbouring extremists.

Heavy fighting

A senior official who attended a meeting of Somalia's Joint Islamic Courts in Mogadishu's Ramadan hotel on Saturday said 88 delegates had been chosen to sit in the CIC, which will legislate and oversee the courts in the Horn of Africa nation.

"The former head of the JIC, Sharif Sheikh Ahmed, will be the  chairman of the council's executive committee, which will be in  charge of day-to-day running of the Islamic courts," an Islamist official said.

"This is one step short of calling for the official establishment of the Islamic Republic of Somalia," said Ahmed Hassan, a Somali democracy advocate.

Earlier this month, militias loyal to the city's Islamic courts seized the Somali capital after defeating the ARPCT.

The victory followed four months of fighting that left more than 360 people dead and over 2,000 wounded.

On Thursday, the Islamists signed a mutual recognition pact with the powerless transitional government of President Abdullahi Yusuf Ahmed.

Somalia has lacked an effective government since Mohamed Siad Barre was toppled in 1991.