By Duncan Miriri and Giles Elgood

NAIROBI (Reuters) - Kenyan President Mwai Kibaki and opposition leader Raila Odinga signed a power-sharing agreement on Thursday intended to end a post-election crisis that left 1,000 people dead.

Crowds of onlookers clapped as the two rivals inked a deal at a televised ceremony to set up a coalition government following negotiations mediated by former U.N. chief Kofi Annan.

The two leaders had come under intense pressure to compromise over Kibaki's disputed re-election in a Dec. 27 vote, which forced 300,000 people to flee their homes and severely damaged Kenya's reputation as a stable economic regional hub.

The agreement involves the creation of a prime minister's post for Odinga and posts in the new cabinet will reflect the rival parties' strength in parliament.

Portfolios would be balanced along the same lines, Annan said.

"Compromise was necessary for the survival of this country," Annan said after the signing.

"I commend all those whose efforts have made this possible ... they kept the future of Kenya always in their sights and reached a common position for the good of the nation."

African Union chairman Jakaya Kikwete, who threw his weight behind talks this week, also praised the parties.

"I salute the people of Kenya on this historic occasion," said Kikwete, who is also president of neighbouring Tanzania.

Thursday's talks brought Odinga and Kibaki to the same table for the first time in a month, after discussions between their parties hit a deadlock earlier in the week.

The opposition had threatened to hold mass street protests on Thursday, but called them off after meeting Annan, a former U.N. Secretary-General, on Wednesday.

The crisis exploded after Kibaki was sworn in on Dec. 30 and Odinga claimed the election was rigged, a charge the president denied.