CAIRO, Dec 17 (Reuters) - Egypt's new public prosecutor, appointed by President Mohamed Mursi last month, resigned on Monday in a move welcomed by Mursi's opponents as a victory for the independence of the judiciary.

Public Prosecutor Talaat Ibrahim stepped down after a furore among judges who said Mursi's decision in November to sack the former public prosecutor and appoint Ibrahim was an assault on their independence.

The former public prosecutor, Abdel Maguid Mahmoud, had served for many years under former President Hosni Mubarak who was ousted by a popular uprising in February 2011.

The main state newspaper Al-Ahram said Ibrahim's resignation would be presented to the Supreme Judicial Council on Sunday. A senior judge who had opposed his appointment urged other members of the judiciary to suspend a strike launched in protest.

Many judges had voiced anger over a decree Mursi issued on Nov. 22 expanding his powers and temporarily putting himself above judicial review. The decree spurred nationwide protests and deadly clashes between Mursi's supporters and opponents.

Mursi sacked Mahmoud the same day to try to appease protesters demanding the retrial of officials they say were involved in carrying out violence against them during last year's uprising.

Mursi had already tried to remove Mahmoud in October to calm protesters furious about the acquittal of a number of senior officials who had stood trial over the issue. The move kicked up a storm of protest from judges who said the president had exceeded his powers and was threatening their independence.

The judiciary, like Egyptian society at large, has been split over the vote on a controversial constitution and the way in which it was drafted, with many judges boycotting supervision of the referendum which began on Saturday Nov. 15.

The Muslim Brotherhood's party, which propelled Mursi to power in a June election, said its unofficial tally for the first-round vote on the constitution showed 57 percent of voters backed it, supporting liberal opposition arguments that many felt the document too partisan.

The body that wrote the document faced a raft of legal challenges. Critics say its popular legitimacy was further called into doubt by the withdrawal of many of its non-Islamist members, who complained their voices were not being heard.

The constitution is a crucial element in Egypt's transition to democracy. New parliamentary elections will not be held until the document is completed and passed by a popular referendum.

More than 1,300 members of the General Prosecution gathered in front of Ibrahim's office on Monday demanding that he leave the post.

When, hours later, Ibrahim announced he had resigned, the protesters cheered and shouted "God is Great! Long live justice!" and "Long live the independence of the judiciary!", witnesses present at the protest said.

Khaled Mahgoub, a leading figure in Cairo's Judges Club who was among the protesters said: "Now we ask all judges who had suspended their work in protest at the president's decision to hire a public prosecutor to return to their jobs, and for the judges to all celebrate their victory and independence."

Earlier in the day, members of the State Council Judges' Club had announced they would boycott the second round of the referendum to be held on Saturday Dec. 22.

Leading opposition politician Mohamed ElBaradei wrote on Twitter: "Gratitude goes to the members of the general prosecution in their solid stance on legitimacy and independence of the judiciary. Truth remains above power."