Nearly 600 soldiers dismissed last month from East Timor's armed forces for striking over labour conditions have threatened to wage a guerrilla war if the government failed to resolve their dispute with the military leadership.

About 3,000 people joined a protest rally on Monday organised by the soldiers in the capital. Protesters marched 10 kilometres into Dili, waving banners and posters denouncing the dismissals.

"We urge the government, the president, Parliament and Supreme Court to solve our problem... in five days," said 2nd Lieutenant Gastao Salsinha, a spokesman for the soldiers who coordinated the February 8 strike.

"We the petitioners are ready to conduct a new guerrilla war in East Timor if our formal leaders in this country have no political will to solve our problem," he said.

There was no immediate response from the government or the military. The strikers were protesting working conditions and promotion rules, and they demanded the elimination of alleged "nepotism and injustice" in the service.

The ex-soldiers also rejected a commission formed by President Xanana Gusmao to investigate the problem, accusing it of bias.

The dismissal of the soldiers was a serious blow to the 1,600-strong East Timor Defence Force, which was set up after East Timor voted for independence from Indonesia in 1999.

Most of the soldiers came from the ranks of the East Timorese resistance to Indonesian rule.