* Venezuela-Colombia spat continues after weekend murders

* Venezuela to prosecute Colombian "spies"

* Colombia's DAS denies espionage allegations (Recasts, adds Chavez comments)

By Ana Isabel Martinez

CARACAS, Oct 27 (Reuters) - President Hugo Chavez said on Tuesday two Colombian security agents were arrested for spying in Venezuela, heightening tensions in a diplomatic dispute between the Andean nations.

The former paratrooper said the agents of Colombia's security agency DAS were captured trying to bribe Venezuelan officials for information on military equipment, military units and militias.

"They will be judged according to Venezuelan law and will be granted their rights ... they were captured red-handed, practicing espionage and it's not the first time ... we will not release them," Chavez said during a televised Cabinet meeting.

Behind the espionage detainees lies "the hand of the CIA and the government of the United States," said Chavez, who has called neighboring Colombia a "hostile government."

Neither Chavez, nor Venezuelan Deputy Foreign Minister Francisco Arias Cardenas who first confirmed the arrests, gave any other details about the alleged spies.

Colombia's security agency DAS issued a statement denying it had sent agents into Venezuela to spy or to destabilize the government.

Diplomatic and commercial ties between the South American neighbors have been frayed before. Earlier this year, Chavez suspended relations and reduced trade over a Bogota plan to allow U.S. troops to use seven Colombian bases.

Tensions were reignited over the weekend after the murder of 10 members of an amateur Colombian soccer team across the border in Venezuela, an incident the Venezuelan government said it would investigate.

Maria Luisa Chiape, the Colombian ambassador to Venezuela, said, "I will not be provoked. I think it is important not to lose sight of the central point that is the fact 10 people, including eight Colombians, were killed in a massacre."

COLOMBIA DEMANDS PROBE

Colombian Foreign Minister Jaime Bermudez called for an investigation of the murders.

"The entire world is confident that Venezuela will conduct a responsible, prompt, and transparent investigation," he said to reporters in Bogota.

Colombian President Alvaro Uribe's close ties with Washington have helped his government secure billions of dollars in U.S. aid to fight drug traffickers and leftist guerrillas.

Chavez, a leftist who has become a flag-bearer for anti-U.S. sentiment in the region, has sparred with Uribe over his government's U.S.-backed campaign against Marxist rebels. Chavez denies charges he supports the FARC guerrillas.

Chavez's government says the kidnapping and murder of the Colombian football team is part of the prolonged civil conflict within Colombia and has blamed the killings on Colombian ELN rebels, the country's second largest guerrilla group.

Uribe has attributed the murders to terrorism and has requested the Venezuelan government help protect the border population.

The porous border area between Colombia and Venezuela is populated with various armed groups and drug traffickers. Kidnapping, smuggling and extortion are common. (Additional reporting by Luis Jaime Acosta in Bogota; writing by Rebekah Kebede; editing by Patrick Markey and Mohammad Zargham)

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