By Steve Scherer

ROME (Reuters) - Italian voters gave Prime Minister Enrico Letta's fragile coalition government a badly needed boost in local elections, shunning Beppe Grillo's anti-establishment 5-Star Movement three months after its spectacular success in a parliamentary vote.

Letta's battered and divided Democratic Party (PD) won control of five of the 16 biggest cities that voted on Sunday and Monday, and is in the lead before run-offs in two weeks' time for the rest, Interior Ministry results showed.

Its coalition partner, billionaire and former prime minister Silvio Berlusconi's People of Freedom (PDL) party, came in second.

The rival parties are uncomfortable bedfellows in a right-left coalition that is struggling to halt a slump in its popularity as Italians fret over how the country will emerge from the longest recession in its post-war history.

Fiery comic Grillo's 5-Star Movement did not win in any of the 564 towns and cities that voted and gained only 12.8 percent of the vote in Rome, less than half its result in the capital three months ago.

"It's clear that this is good for Letta because it gives him a couple of months to work," said Maurizio Pessato, vice chairman of the SWG polling institute. "Grillo's movement has suffered a setback."

In February, the 5-Star stormed into parliament for the first time by winning a quarter of the national vote as Italians turned their backs on traditional political parties, who they blamed for corruption, waste and mismanaging the economy.

Pessato said the 5-Star Movement's defeat was in part because Grillo had rebuffed overtures to back a PD-led government, disappointing the traditional center-left voters who chose Grillo over the PD.

"The center-left voters who voted for Grillo three months ago returned to the center-left," Pessato said.

5-STAR DISSENT

In a blog on Tuesday, Grillo said sarcastically he "understood" why voters would choose the old parties that accept public financing over the 5-Star, which does not.

But there is growing dissent among the 162 5-Star lawmakers. Earlier this month a group openly rebelled against Grillo's orders to hand back a portion of parliament's generous expense allowances and some have criticized their leader's heavy-handed tactics.

Media reports say some lawmakers are considering abandoning the 5-Star and forming their own bloc.

"People who voted for us with their gut three months ago have responded with their gut," Tommaso Curro, a 5-Star deputy, told Reuters in reaction to the local vote.

"Our entry into parliament brought a lot of hope to a lot of people, and those hopes were not turned into reality."

But Riccardo Nuti, who will become the movement's lower-house leader in June, played down the defeat, saying the local vote was not comparable to the national one. He did not see the group splintering.

"But if someone decides to abandon ship when there are some difficulties, they cannot be chained down."

($1 = 0.7729 euros)

(Additional reporting by Francesca Piscioneri; Editing by Raissa Kasolowsky and Angus MacSwan)