By Brandon Shulleeta

CHARLOTTESVILLE, Virginia (Reuters) - The president of the University of Virginia was reinstated on Tuesday by the school's board, whose surprise decision to force her out two weeks ago set off a wave of protests by faculty and students.

Teresa Sullivan, appointed the first woman president of the prestigious university two years ago, was greeted by thousands of cheering supporters on campus after her reinstatement was announced.

Sullivan resigned under pressure earlier this month, citing a "philosophical difference of opinion" with the Board of Visitors. The move prompted calls from students, alumni and faculty for a more detailed explanation from the university's governing board.

In a 15-0 vote, the board reversed that decision on Tuesday.

"While many believe that the past two weeks have threatened our great institution, I believe that we have been strengthened by the experience," Sullivan said in a statement. "It has, in fact, propelled our academic community to a new place and made it ready to face a quickened pace of change."

Virginia Governor Bob McDonnell had demanded that the board, which he oversees, resolve the issue at Tuesday's meeting. If they failed to do so, he said, he would call for all board members to resign.

The blowup between faculty and the governing board over Sullivan's departure highlighted the secrecy and impenetrable internal politics of one of the most prestigious public universities in the United States, founded by Thomas Jefferson in 1819 in Charlottesville.

It also made clear critical differences within universities over how to approach the pressing issues of rising tuition costs, falling state subsidies and the sometimes rocky transition from traditional classrooms to online course work.

Facing a torrent of criticism over its ouster of Sullivan, the university's board at one point asked Carl Zeithaml, dean of the McIntire School of Commerce, to step in as interim president. He later suspended any discussion of becoming interim president until Sullivan's future was clarified.

"Carl has always been a devoted citizen of our community and his actions of the past week speak to that commitment," Sullivan said in her statement.

Addressing thousands who gathered in front of the university's Rotunda -- many cheering "Terry, Terry, Terry," -- Sullivan said there was "no time for residual hostility" over the events of the past 16 days.

Sullivan had previously served as provost and executive vice president for academic affairs at the University of Michigan. Her predecessor at the University of Virginia spent 20 years in the post.

(Reporting by Brandon Shulleeta; Editing by Paul Thomasch and Christopher Wilson)