(Adds U.S. Vice President Pence's reaction)

By Thu Thu Aung and Poppy McPherson

YANGON, Jan 11 (Reuters) - A Myanmar court on Friday rejected the appeal of two Reuters reporters sentenced to seven years in jail on charges of breaking the Official Secrets Act, saying the defence had not provided sufficient evidence to show they were innocent.

Wa Lone, 32, and Kyaw Soe Oo, 28, were convicted by a lower court in September in a landmark case that has raised questions about Myanmar's progress towards democracy and sparked an outcry from diplomats and human rights advocates.

"It was a suitable punishment," said High Court Judge Aung Naing, referring to the seven-year prison term meted out by the lower court.

The defence has the option of making a further appeal to the country's supreme court, based in the capital Naypyitaw.

"Today's ruling is yet another injustice among many inflicted upon Wa Lone and Kyaw Soe Oo. They remain behind bars for one reason: those in power sought to silence the truth," Reuters Editor-in-Chief Stephen J. Adler said in a statement.

"Reporting is not a crime, and until Myanmar rights this terrible wrong, the press in Myanmar is not free, and Myanmar's commitment to rule of law and democracy remains in doubt."

U.S. Vice President Mike Pence said in a message on Twitter that the decision was deeply troubling and showed Myanmar's courts "failing a basic test in democracy."

"In the name of free & independent press, the gov't of Burma should release these journalists immediately. The world is watching," Pence added.

In their appeal arguments last month, defence lawyers had cited evidence of a police set-up and lack of proof of a crime. They asserted the lower court that tried the case had wrongly placed the burden of proof on the defendants.

The defence also said prosecutors had failed to prove the reporters gathered and collected secret information, sent information to an enemy of Myanmar or that they had an intention to harm national security.

Explaining his verdict, Judge Aung Naing said the reporters had behaved in a way that showed they intended to harm the country.

The judge cited meetings between reporter Wa Lone and members of the security forces as well as a notebook found at the journalist's house that contained the phone number of a member of the Arakan Army, an armed ethnic rebel group he had reported on while covering peace negotiations several years ago.

Wa Lone had testified during the trial that the phone number did not work and he did not have contact with the rebel group.

"Action can be taken against them if, judging by their behaviour and characteristics, it appears they will harm the national security and interests of the country," said Aung Naing.