* Rights groups to exhume victims of 36-year civil war

* Around 1,000 victims believed to be in mass grave

* Work could help prosecute former police, soldiers

GUATEMALA CITY, March 22 (Reuters) - Guatemala's biggest mass grave may give up its secrets this year when bodies from a massacre during the 1960-1996 civil war are exhumed after decades of mystery.

Following years of work in rural graves and battling for clues, official permits and funding, rights groups will start digging at a cemetery in Guatemala City, part of a healing process as Guatemala unearths victims of the long conflict.

Around 1,000 bodies in a mass grave at the La Verbena cemetery are thought to be the victims of extrajudicial killings by the army and police during some of the most violent years of the conflict.

"These are people who were taken to be questioned, interrogated, probably tortured," said Fredy Peccerelli, an activist leading efforts to exhume the bodies later this year with $1 million in aid from the United States and Europe.

"If they knew very little, (they were) killed quickly. If they knew a lot, they were held first for three to six months," added Peccerelli, who runs the non-governmental Forensic Anthropology Foundation and who worked in Bosnia after the 1992-95 Balkan conflict.

Almost a quarter of a million people were killed or disappeared during the conflict between leftist guerrillas and the government. Over 80 percent of the murders were committed by the army, according to a U.N.-backed truth commission.

Activists say many of the dead at La Verbena were between the ages of 16 and 40 and killed by gunshot wounds to the head. That raised the suspicion that they were executed by the army or police.

Bodies from the killings were believed to be thrown together with routine unidentified dead and those with bodies whose families could not afford to pay for their graves. The bodies were buried under concrete lids in a grave of four large pits thought to contain 40,000 bodies.

Workers plan to exhume and identify the bodies by lowering a platform with removable floorboards into each pit and excavating layers of bones until they find those with bullet holes in the skulls. These will then be cross checked against a DNA database of family members of the disappeared to finally identify the victims and give them a proper burial.

Peccerelli hopes the forensic evidence will also be used in the prosecution of former police and army officers.

Earlier this month, two former policemen became the first people to be arrested and charged over the forced disappearance of student leader Fernando Garcia, who went missing in 1984 and whose body has never been found.

Anthropologists, with help from local people, have already found the remains of thousands of people massacred and buried in the Guatemalan countryside, but the fate of those killed in towns and cities has until now barely been investigated. (Editing by Philip Barbara)