Granted house arrest, Venezuela opposition leader vows to fight on

(Adds comments by Maduro and U.S. State Department)

By Brian Ellsworth and Alexandra Ulmer

CARACAS, July 8 (Reuters) - Venezuela's best-known jailed opposition leader Leopoldo Lopez celebrated a surprise return to his family after being granted house arrest on Saturday with a promise to fight on following three years' imprisonment for leading anti-government protests.

Hours after his pre-dawn transfer from the Ramo Verde military jail, Lopez appeared over a wall of his Caracas house, waving the Venezuelan flag and punching the air before a crowd of supporters who cheered and cried upon seeing him.

In a message released by his party, the 46-year-old hardliner urged opposition supporters to continue street protests against President Nicolas Maduro, which are in their fourth month and have led to at least 90 deaths.

"If maintaining my fight for freedom means running the risk of returning to a cell in Ramo Verde, I am more than happy to take it," he said in the message read by Freddy Guevara, the No. 2 in Lopez's Popular Will party.

"Today, I am a prisoner in my house, but so are the Venezuelan people. What kept me going in the toughest days was knowing that whatever suffering I endured was nothing compared to our people."

Lopez's release, aided by foreign pressure, gave some rare cheer to Venezuela's opposition who have otherwise seen Maduro give few concessions in their demands for freedom of activists, general elections and fixes for an economic crisis.

"Despite being under house arrest, he showed his face to the country," said Maria Garcia, 36, a business consultant, outside his house. "What we need to do now is stay in the street, because we need to achieve not just the freedom of Leopoldo but also the freedom of the Venezuelan people."

Fresh opposition street rallies were planned for Sunday.

PRESIDENTIAL AMBITION

A photogenic, Harvard-educated former mayor and economist, Lopez would likely be a popular opposition presidential candidate if able to run in any future vote.

He is serving a sentence of nearly 14 years.

While the socialist Maduro may be calculating Lopez's return home will ease pressure on him, opposition leaders presented it as a triumph for their protest strategy and a sign the government was caving.

It was not clear, however, how Lopez's presence at home could materially weaken Maduro, who is plowing ahead with a plan to create a parliamentary superbody that will be able to rewrite the constitution and even dissolve state institutions.

The opposition has long called Lopez a political prisoner, and leaders around the world, including U.S. President Donald Trump, had been pressing for his full freedom.