By Benjamin Kang Lim and Ben Blanchard

BEIJING (Reuters) - China has put Zhou Yongkang, one of the most powerful politicians of the last decade, under virtual house arrest while the ruling Communist Party investigates accusations of corruption against him, several sources said on Wednesday.

Zhou is the most senior official to be ensnared in a graft scandal since the Communists came to power in 1949. He was the domestic security tsar and a member of the party's Politburo Standing Committee - the pinnacle of power in the country - when he retired last year.

Chinese President Xi Jinping ordered a special task force formed in late November or early December to look into several accusations brought against Zhou by political rivals, sources with ties to the leadership told Reuters, requesting anonymity to avoid repercussions for discussing secretive elite politics.

"Zhou Yongkang's freedom has been restricted. His movements have been monitored," one source said, adding that he cannot leave his Beijing home or receive guests without prior approval.

Zhou is being investigated for violating party discipline, official jargon for corruption, the sources said. They did not say what the specific allegations were.

Xi was installed as head of the party just over a year ago, and as president in March, and the investigation illustrates his growing power and confidence that he can manage any rift that may ensue.

In ordering the investigation, Xi has broken with an unwritten understanding that members of the Standing Committee will not be investigated after retirement.

But Xi has yet to decide whether Zhou would be publicly prosecuted, pending completion of the internal probe, the sources said. Xi has declared war on corruption, vowing to go after powerful "tigers" like Zhou as well as lowly "flies".

"Xi has pulled out all the tiger's teeth," a second source said, referring to the downfall of Zhou's men, including Jiang Jiemin, who was the top regulator of state-owned enterprises for just five months until September when state media said he was put under investigation for "serious discipline violations".

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Jiang was previously chairman of state-owned China National Petroleum Corp (CNPC) - Zhou Yongkang's power base - as well as one of its subsidiaries, oil-and-gas behemoth PetroChina. Zhou served as CNPC's general manager from 1996-1998, having risen through the ranks.

"Zhou Yongkang is a toothless tiger and tantamount to a dead tiger. The question is: will Xi skin the tiger?" the source said, referring to a trial.

Political analysts say such an indictment and a trial would instill fear in other retired leaders and the party's 80 million members, worsening infighting among rival political factions.

Jonathan Fenby, director of China research at analyst group Trusted Sources, said any form of public trial of Zhou would be "potential for embarrassment ... given his long tenure at the top".

The Chinese government has neither confirmed nor denied Chinese-language media reports in Hong Kong, Taiwan and the United States that Zhou has been arrested on charges of corruption and other crimes.

Zhou and his family could not be reached for comment. It is not clear if they have lawyers.

The cabinet spokesman's office, which doubles as the party's public affairs office, did not respond to a request for comment.

LINKED TO BO XILAI

Zhou was a patron of the once high-flying politician Bo Xilai, who was jailed for life in September for corruption and abuse of power - the worst political scandal since the 1976 downfall of the Gang of Four at the end of the Cultural Revolution.

"Xi Jinping and (Premier) Li Keqiang hate Zhou Yongkang as he was the only standing committee member who opposed ousting Bo Xilai. They are gunning for Zhou," said a source who has ties to the military.

Bo's career was stopped short last year by the attempted defection of his estranged police chief who implicated Bo's wife in the murder of a British businessman over a business dispute. Bo's wife and his former police chief have been convicted and jailed.

"Zhou's men have been sidelined," another source said.

"The Central Commission of Political Science and Law has been cleansed of Zhou's men," the source said, referring to the powerful party body once headed by Zhou that oversees the police force, the civilian intelligence apparatus, judges, prosecutors and paramilitary police.

The movements of Zhou's eldest son, Zhou Bin, have also been restricted while he helps with the corruption investigation that has implicated Jiang, the regulator of state-owned enterprises.

The elder Zhou retired as domestic security tsar and from the standing committee during a sweeping leadership reshuffle last year. During his five-year watch, government spending on domestic security exceeded the defense budget.

He was last seen at an alumni celebration at the China University of Petroleum on October 1.

He was also among party leaders who offered condolences or sent flowers to the family of a respected educator who died last month, state media reported on November 26.

Hong Kong's South China Morning Post newspaper reported in late August that the leadership had agreed to open a corruption investigation into Zhou.

But sources with ties to the leadership told Reuters at the time that Zhou was merely helping authorities with the investigation into state energy companies and, contrary to media reports, was not the target then.

That changed after Xi ruled that no one was above the law.

Zhao Hongzhu, one of the party's top anti-corruption officials, declared in October that anyone who violated party discipline or broke the law would be punished "regardless of who it involved, how much power he has or how high his position is".

(This story has been corrected to change "without prior approval" in 4th paragraph)

(Editing by Raju Gopalakrishnan)