(Adds protest, Church response, details)

By Michael O'Boyle

MEXICO CITY, Aug 28 (Reuters) - Mexico's Supreme Court on Thursday upheld a law allowing abortion in the capital, handing a victory to leftist city lawmakers over conservative President Felipe Calderon's government and the Roman Catholic Church.

In an 8-3 vote, judges said there were no grounds to overturn a law approved in 2007 by the Mexico City assembly that legalized abortions on demand during the first trimester and established free public clinics.

The bells of the cathedral in the capital's historic Zocalo square pealed in mourning.

The court's ruling was applauded by women's rights advocates, who have campaigned for decades to legalize abortion in the world's second most-populous Catholic country.

The landmark decision could open the door for other states in Mexico to follow the capital's lead in relaxing laws that criminalize abortion, legal experts said.

"This is a triumph of the recognition of women's fundamental rights," said Maria Luisa Sanchez, director of abortion rights advocacy group GIRE. "It will surely establish a precedent for Mexico, for the other states and for the region of Latin America."

A small group of young anti-abortion activists gathered outside the court, chanting "Yes To Life. No To Abortion."

"No court can contradict the supreme law of God that orders us: thou shalt not kill," Mexico's top Catholic churchman, Cardinal Norberto Rivera, said in a statement.

Church leaders had initially threatened to excommunicate city officials belonging to the leftist Party of the Democratic Revolution who sponsored the law.

'LAW OF GOD'

The court's ruling was a political boost for Mexico City's leftist mayor, Marcelo Ebrard, who is grooming himself for a possible presidential bid in 2012.

Ebrard has supported a series of measures that have angered church leaders, including gay civil unions and a statute allowing the terminally ill to refuse treatment.

In their ruling, the judges found that Mexico's constitution did not explicitly guarantee the right to life of the fetus, and that the interests of the unborn had to be balanced with those of women seeking an abortion.

Abortion is currently only allowed outside the capital under special circumstances, such as in the case of rape or when the woman's life is in danger. Pro-abortion campaigners complain that some doctors in public hospitals in Mexico City have refused to carry out abortions despite the law.

While Calderon stayed largely on the sidelines of the battle, his attorney-general and the National Human Rights Commission sought to reintroduce a ban on abortion.

Last month, a congressional committee in Brazil voted down a bill that would have legalized abortion in the world's most populous Catholic country.

The leftist government in Ecuador is attempting to pass a new constitution that Church leaders claim could pave the way toward legalizing abortion. (Editing by Kieran Murray)

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