* Minority Sunnis angry with Shi'ite premier
* Fears grow of return to sectarian conflict
* Parliament passes law limiting PM to two terms
By Kamal Naama
FALLUJA, Iraq Jan 26 (Reuters) - Thousands of mourners rallied on Saturday for the funerals of Sunni Muslims shot dead by troops as they rallied to demonstrate against Iraq's Shi'ite Prime Minister Nuri al-Maliki.
Sunnis have taken to the streets since December to protest against what they call mistreatment of their minority sect, increasing fears Iraq could slide back into the kind of Shi'ite-Sunni bloodletting that killed tens of thousands in 2006-2007.
Troops on Friday shot dead five people in Falluja, escalating the confrontation between the Shi'ite-led government and demonstrators in the Sunni-dominated western province of Anbar.
Sunni unrest has been accompanied by an increase in attacks by the Iraqi wing of al Qaeda. Four suicide bombers have struck over the last week, including one who killed a Sunni lawmaker in Falluja.
Falluja's streets filled with thousands, many taking turns to carry the coffins of slain protesters. Others carried portraits of the victims or waved the old national flag from Saddam Hussein's era, before the U.S.-led invasion ousted the Sunni strongman.
Iraqi authorities have tried to calm anger over the shootings by withdrawing soldiers from the city and replacing them with federal police, but protesters want more concessions.
"Withdrawing the army from the city is not enough, I do not know how this will benefit me and it won't get my brother back," said Mustafa Jamal, a relative of a slain protester.
Many Sunnis want reforms to anti-terrorism laws they feel unfairly target them and to a campaign against former members of Saddam's outlawed Baath party. But Sunni ranks are split, with more hardline leaders demanding the ousting of Maliki.
In another challenge to Maliki, lawmakers on Saturday passed a law limiting the prime minister to two terms in an attempt to block the Shi'ite premier from running again next year.
But it still needs the president's approval and will face challenges in court, after Maliki's supporters rejected it as illegal.
Since the fall of Saddam in 2003, many Iraqi Sunnis feel they have been sidelined by the Shi'ite leadership and believe Maliki is amassing power at their community's expense.
After the last American troops left Iraq a year ago, the country's Shi'ite, Sunni Muslim and ethnic Kurdish parties became locked in a power-sharing stalemate that has left key oil and investment laws paralysed in parliament.
But lawmakers from Sunni, Kurdish and Shi'ite parties voted to pass the term limits law on Saturday.
It would restrict the prime minister, parliament speaker and president to two four-year terms. First elected in 2005, Maliki was re-elected in 2010 in an indecisive ballot that led to the power-sharing deal.
"This means Maliki cannot be prime minister any more. This will stop people consolidating power in their hands," Sunni lawmaker Jaber al-Jaberi said.
Kurdish parties, the Sunni-backed Iraqiya bloc and even some rivals in Maliki's own Shi'ite coalition tried unsuccessfully last year to trigger a vote of no confidence in the prime minister.
"This is an illegal law passed by Maliki's opponents who fear facing him at ballot boxes", said Ali al-Shallah, a lawmaker with Maliki's alliance. (Additional reporting by Suadad al-Salhy and Ahmed Rasheed; Editing by Patrick Markey and Andrew Roche)