AUC's Giraldo arrives at the peace table...

Colombia's "Lord of the Sierra" hands in his gun.

BOGOTA, Colombia (Reuters) - One of Colombia's most notorious paramilitary warlords, convicted mass-murderer and wanted cocaine trafficker Hernan Giraldo handed in his arms to the Colombian government on Friday under a peace deal which could let him off with a relatively light jail sentence.

Wearing a white broad-brimmed hat, the mustached man known as "the Lord of the Sierra" because of his domination of cocaine-producing plantations in the snow-capped Sierra Nevada mountains, surrendered his pistol to government peace negotiator Luis Carlos Restrepo in a ceremony at Quebrada El Sol in northern Colombia.

Giraldo's 1,166-member fighting force, known as the "Tayrona Resistance Block," which is part of the illegal United Self-Defense Forces of Colombia, a far-right group known by its Spanish initials AUC, also handed in assault rifles and other weapons.

A total of 21,300 AUC members have now surrendered their arms following peace talks with the government.

Colombia's ally the United States, which has given more than $3 billion in aid since 2000, says it supports the peace talks with the paramilitaries despite calling the AUC a "terrorist" cocaine-smuggling group.

Washington says it would still like the extradition of those with U.S. arrest warrants although that is unlikely to happen if warlords keep to peace pledges.

The AUC has its origins in vigilante groups set up by cattle ranchers and cocaine traffickers to fight off Marxist rebels and has been accused by authorities of many of Colombia's worst human rights abuses -- sometimes in cahoots with members of the armed forces.

In return for full confessions and the return of stolen property, paramilitaries have been promised they will not be sentenced to more than eight years in jail.

This would mean a substantial reduction in jail time for paramilitary chiefs such as Giraldo, whose many pending criminal arrest warrants include a U.S. call for his extradition on cocaine trafficking charges.

In the early 1990s, a Colombian court sentenced Giraldo in absentia to 20 years in jail for his role in the massacre of 20 banana workers. He is also wanted for the murder of two anti-narcotics agents and his men have been implicated in killings of Kankuamo Indians as part of his war against Marxist rebels in the Sierra Nevada.

Right-wing President Alvaro Uribe says the demobilization of all but a remaining few thousand AUC members has contributed to a steep fall in violence associated with the country's four-decade-old guerrilla war.

Uribe, who, polls say, is heading to win a second term in May's election, has also stepped up military action against Marxist rebels.

But human rights groups say the paramilitaries are being let off lightly and that there are signs they are preserving their cocaine and other criminal business.

"Our concern is that these groups will remain active and in fact will consolidate their power through this process and that paramilitary commanders will be able to shield themselves from what they fear the most, which is extradition to the U.S.," said Maria McFarland, of Human Rights Watch.