Human rights groups celebrated on Friday after a court in Guatemala ruled that the former dictator Efraín Ríos Montt, who presided over one of Latin America's bloodiest civil wars, will face trial on charges of genocide and crimes against humanity.

Members of the Ixil tribe, which suffered horrific atrocities at the hands of the army, said they had waited decades for this moment but expressed disappointment that the retired general was placed under house arrest rather than jailed.

After a day-long hearing, Judge Carol Patricia Flores Blanco ruled on Thursday that there was sufficient evidence linking Ríos Montt to the massacre of 1,700 indigenous people during his 17-month rule in 1982 and 1983.

The judge agreed with prosecutors who said the 85-year-old, as head of the government at the time, should answer for the armed forces' actions. It was one of the more brutal phases of a 36-year conflict which ended in 1996 after claiming 200,000 lives. The trial's preliminary hearing was scheduled for March.

Eduardo de Leon, of the Rigoberta Menchú foundation, named after the Nobel peace prize winner, told reporters it was a historic day. "The justice system is settling debts it had with indigenous people and society for grave human rights violations," he said.

Survivors' groups erected altars and shrines with candles and photos in the plaza in front of the tribunal. "I would have done anything to see that gentleman seated in the dock," a peasant named only as Pedro, who lost his father during the conflict, told el Periódico.

Andrea Barrios, of the Movement of Women, said activists' patience and stubbornness had been rewarded.

Aura Elena Farfán, of the Families of the Detained and Disappeared of Guatemala, complained that the defendant was allowed home after posting £40,000 bail, rather than jailed. "For us this doesn't mean anything. It's as if Ríos Montt was free," she said. "It pains us and we think the ruling is a game. It wasn't what we expected." Others said the defendant's impeccable suit and punctuality - in fact he arrived early - were part of a strategy to clinch house arrest.

Prosecutors said the dictator, who seized power in a coup, unleashed a campaign of slaughter, terror and rape against Maya highland villages which were suspected of backing leftwing guerrillas.

Human rights groups have long accused him of being among the cruellest despots during Latin America's cold war era of US-backed counter-insurgency operations. The Reagan administration armed and supported Ríos Montt, calling him a bulwark against communism.

During the prosecutors' presentation, the judge asked the defendant if he had any response. In a firm voice, he said: "I prefer to remain silent." Defence lawyers argued he could not be held responsible for abuses because he did not determine the level of force nor control battlefield operations.

Survivors' decades-long quest for justice bore fruit last year when prosecutors opened cases against two other retired generals. Ríos Montt was immune from prosecution since his election to congress in 2000 but his term expired earlier this month.

Meanwhile in Chile, in a further sign of the region's grappling with its authoritarian past, the government decided to resume using the term "dictatorship" when referring to Augusto Pinochet's 1973-1990 rule. Late last year Sebastian Piñera's centre-right administration caused controversy by amending the term to "military regime" in textbooks. It backtracked after being accused of trying to veil history.