MORELIA, Mexico (AFP) - Mexico's interior minister urged vigilantes on Monday, Jan 13, 2014, to quit their growing armed struggle against a drug cartel and go home, vowing that federal forces would handle security in their embattled towns.

Interior Minister Miguel Angel Osorio Chong made his plea after the "self-defence" forces seized another town in the troubled western state of Michoacan, gaining ground in their battle against the Knights Templar gang.

Admitting that Michoacan faced a security "crisis", Mr Osorio Chong signed a new security pact with Governor Fausto Vallejo in which federal forces would take over the responsibilities of state and local police.

"The self-defence groups are asked to return to their places of origin and resume their normal activities," Mr Osorio Chong said after the emergency security talks in the state capital, Morelia.

The vigilantes formed almost a year ago in Michoacan's lime and avocado growing region, arguing that local police were unwilling or unable to curb the cartel's violence and extortion rackets.

Ignoring repeated government warnings that their expansion would not be tolerated, the civilian militias seized another Templar bastion on Sunday, the town of Nueva Italia.

The vigilantes say they have now surrounded the gang's presumed headquarters, the city of Apatzingan, which they have made their next target.

The Templars have accused the self-defence forces of being a proxy force for the rival Jalisco New Generation cartel, a charge the vigilantes deny.

President Enrique Pena Nieto deployed thousands of troops and federal police to Michoacan in May, but the state has turned into his 13-month-old administration's biggest security crisis.

Mr Osorio Chong invited the vigilantes to join the regular police forces and warned the authorities would not tolerate people using illegal weapons.

The security pact includes the creation of an academy to train local police as well as US$18.7 million (S$23.7 million) in funds for prevention programmes to "rebuild the social fabric", Mr Osorio Chong said.

On his part, Mr Vallejo announced that he would now regularly work from Apatzingan and other towns in Michoacan's agricultural region known as Tierra Caliente, or Hot Country.