By Joanna Jolly

After resisting Indonesia's military occupation for 24 years, East Timor's scrappy guerrilla force was transformed Thursday into the core of a new national army.

In an emotional ceremony, the former rebels lowered their guerrilla flag and replaced it with the blue-and-white banner of the United Nations, which will oversee their transition.

''We will become the East Timor Defense Force, but the seed from which this new force was germinated is Falintil,'' former rebel commander Taur Matan Ruak told 1,700 soldiers at the mountain town of Aileu, about 30 miles (50 kilometers) south of the capital Dili.

Falintil is the Portuguese acronym for the East Timor National Liberation Armed Forces, formed in the wake of the 1974 collapse of Portugal's colonial empire. Former colonial soldiers flocked into the force, which fought Indonesia during its 1975 invasion of the half-island territory.

The insurgents later withdrew into East Timor's rugged interior where, outnumbered and outgunned, they used knowledge of the land and the near-universal support of the population to survive repeated offensives by Indonesia's U.S.-trained special forces, the Kopassus.

In August, 1999, a U.N.-sponsored referendum ended Indonesian rule. The independence vote sparked massive violence by militias backed by the Indonesian army, ending only with the arrival of international peacekeepers.

East Timor is currently under U.N. administration during its transition to independence. Almost 8,000 U.N. troops are keeping peace in the region.

With elements of the Indonesian army still unreconciled to the loss of the territory, the new defense force may soon be called to prevent armed incursions from neighboring West Timor, still an Indonesian territory.

The ceremony in Aileu opened with a mass held by Nobel peace laureate Bishop Carlos Belo. As soldiers and dignitaries laid wreaths at a memorial to the dead, many wept openly.

''The commanders present here today and those who died during the war are true heroes,'' independence leader Jose ''Xanana'' Gusmao told the troops.

Gusmao, who commanded Falintil until the Indonesians captured him in 1992, became a symbol of resistance to Indonesia's iron-fisted rule. He is widely expected to become the country's first president.

A U.N-commissioned report prepared by the Center for Defense Studies at London's King's College recommended that East Timor should have a 3,000-strong defense force, consisting mainly of light infantry.

An infantry battalion consisting of 650 solders is scheduled to start training immediately. The new force will be armed and trained with the help of international donors, particularly Australia and Portugal.

On Wednesday, the U.N. Security Council approved a resolution to extend the U.N. mission to East Timor until the end of 2002, expressing hope for independence by the end of the year.