By Jonathan Stempel

(Reuters) - The bald eagle may no longer be extinct, but the U.S. effort to protect the national bird became harder on Wednesday.

A federal appeals court revived a religion-based challenge to a U.S. regulation that allows only members of Indian tribes recognized by the government to possess the birds' feathers, so long as they first obtain permits.

The 5th U.S. Circuit Court of Appeals said the Department of the Interior did not show the regulation was the "least restrictive means" to advance the compelling government interest in protecting the bald eagle because of its status as a national symbol.

Wednesday's decision reversed a lower court ruling, and revived claims by Texas-based groups and individuals, including the McAllen Grace Brethren Church, that the regulation violated their rights under the First Amendment's free exercise clause and the Religious Freedom Restoration Act.

The U.S. Department of Justice, which handled the case for the Interior Department, did not immediately respond to a request for comment. Milo Colton, a lawyer for the plaintiffs, did not immediately respond to a similar request.

The case concerned the Eagle Protection Act, a 1940 law designed to protect the bald eagle from extinction because the bird symbolized "American ideals of freedom."

That law, which now also covers the golden eagle, set limits on transactions involving the birds, but contains an exception for "religious purposes of Indian tribes."

The government called the permit regulation an appropriate means to combat illegal trading in eagle feathers, without turning federal agents into "religious police" forced to verify the indigenous genealogy of people who possess the feathers.

Writing for the appeals court, however, Circuit Judge Catharina Haynes found no showing that a permit ban for "all but a select few" American Indians was necessary.

The case began after plaintiffs Michael Russell, who is not an American Indian, and Robert Soto, a pastor at the McAllen church who said he was part of an unrecognized tribe, had their eagle feathers confiscated at a 2006 ceremony known as a powwow.

In June 2007, the United States removed the bald eagle from its endangered species list, saying the number of nesting pairs in the lower 48 states had risen to 10,000 from 400 in 1963.

(Reporting by Jonathan Stempel in New York, editing by G Crosse)