BRASILIA (Reuters) - A growing conflict over land ownership in Brazil's farm belt turned bloody on Thursday when an Indian was shot dead during the violent eviction of some 200 natives from a disputed property owned by a former congressman.

The Terena Indians refused a court order to leave the cattle ranch which they invaded two weeks ago. A federal agency designated the ranch as ancestral native land in 2010, but a local court ruled last year that it belonged to the farmer.

The Indians threw stones at riot police who fired tear gas to dislodge the occupiers from the 17,000-hectare property in the southern state of Mato Grosso do Sul, which produces soy and corn for export.

Brazil's indigenous policy uses anthropological studies to return land to natives and is considered one of the world's most progressive. But it has sparked violence since the country became an agricultural superpower and Indian policy clashed with farming interests.

A Federal Police spokesman in the nearby town of Campo Grande said the Indians shot at the police during the clash and it was not clear who was responsible for the fatal shooting since no bullets were found in the body.

Authorities opened an investigation to establish who shot the Indian. Four other natives were injured, as well as four policemen who had bullets lodged in their bullet-proof vests, the spokesman said.

Reuters reported earlier this month that President Dilma Rousseff has ordered her government to stop turning over farmland to Indians in what the powerful farm lobby says is a hugely misguided effort to right historical injustices.

Thirteen percent of Brazil's territory has been set aside for Indians and handing over more is under consideration. Conflicts, like the one in the cattle ranch, are common and are growing increasingly tense.

The government's Indian affairs office Funai says the federal justice ministry approved the designation of the disputed ranch in Mato Grosso do Sul as a reserve for the Terena in 2010. But ranchers say they have lived in the area for decades.

Farmers praised a government announcement on May 8 that other federal agencies will be involved in land decisions, effectively reducing the jurisdiction of Funai. The farm lobby ultimately wants politicians in Congress to have the last word.

(Reporting by Anthony Boadle; Editing by Paul Simao)