* Prime Minister calls attack at Charlie Hebdo "without precedent"

* Police issue photos of two suspected attackers still at large

* France begins day of mourning (Adds shooting, death of police woman, press reaction)

By Alexandria Sage and John Irish

PARIS, Jan 8 (Reuters) - A policewoman was killed in a shootout in southern Paris on Thursday, triggering searches in the area as the manhunt widened for two brothers suspected of killing 12 people at a satirical magazine in an apparent Islamist militant strike.

Police sources could not immediately confirm a link with the killings at Charlie Hebdo weekly newspaper which marked the worst attack on French soil for decades and which national leaders and allied states described as an assault on democracy.

Montrouge mayor Pierre Brossollette said the policewoman and a colleague went to the site to deal with a traffic accident. A car stopped and a man got out and shot at them before fleeing.

Witnesses said the shooter fled in a Renault Clio car. Police sources said he had been wearing a bullet-proof vest and had a handgun and assault rifle. However, one police officer at the scene told Reuters the man did not appear to fit the bill of the Charlie Hebdo shooters.

Live French television showed around a dozen police dressed in protective wear and helmets massed outside a building near the scene of the shoot-out.

The new incident came as France began a day of mourning for the journalists of Charlie Hebdo weekly and police officers shot dead on morning by black-hooded gunmen using Kalashnikov assault rifles. French tricolour flags flew at half mast.

Charlie Hebdo is well known for lampooning Islam, other religions and political figures. Tens of thousands took part in vigils across France on Wednesday to defend freedom of speech, many wearing badges declaring "Je Suis Charlie" (I Am Charlie) in support of the newspaper and the principle of freedom of speech.

Newspapers across Europe on Thursday either re-published its cartoons or mocked the killers with images of their own.

Britain's Daily Telegraph depicted two masked gunman outside the doors of Charlie Hebdo saying to each other: "Be careful, they might have pens". Many German newspapers republished Charlie Hebdo cartoons.

Police released photos of the two French nationals still at large, calling them "armed and dangerous": brothers Cherif and Said Kouachi, aged 32 and 34, both of whom were already under watch by security services.

The attack has raised questions of security in countries throughout the Western world and beyond. Muslim community leaders have condemned the attack, but some have expressed fears of a rise in anti-islamic feeling in a country with a large Muslim population.

In a separate incident, police sources said the window of a kebab shop next to a mosque in the central town of Villefrance-sur-Saone was blown out by an overnight explosion. Local media said there were no wounded.

Security services have long feared that nationals drawn into Islamist militant groups fighting in Syria and Iraq could return to their home countries to launch attacks - though there is no suggestion that the two suspects named by police had actually fought in either of these countries.

Britain's Cobra security committee was meeting on Thursday morning. London's transport network was target of an attack in 2005, four years after 9/11. There have been attacks in Kenya, Nigeria, India and Pakistan that have raised fears in Europe.

Islamist militants have repeatedly threatened France with attacks over its military strikes on Islamist strongholds in the Middle East and Africa, and the government reinforced its anti-terrorism laws last year.

Prime Minister Manuel Valls said France faced a terrorist threat "without precedent" and confirmed the two brothers were known to security services. But he added it was too early to say whether authorities had underestimated the threat they posed.

"Because they were known, they had been followed," he told RTL radio, adding: "We must think of the victims. Today it's a day of mourning."

A total of seven people had been arrested since the attack, he said. Police sources said they were mostly acquaintances of the two main suspects. One source said one of the brothers had been identified by his identity card, left in the getaway car.

Late Wednesday an 18-year-old man turned himself into police in Charleville-Mézières near the Belgian border as police carried out searches in Paris and the northeastern cities of Reims and Strasbourg. A legal source said he was the brother-in-law of one of the main suspects and French media quoted friends saying he was in school at the moment of the attack.

COURTING CONTROVERSY

Cherif Kouachi served 18 months in prison on a charge of criminal association related to a terrorist enterprise in 2005. He was part of an Islamist cell enlisting French nationals from a mosque in eastern Paris to go to Iraq to fight Americans in Iraq and arrested before leaving for Iraq himself.

Video captured during the Wednesday attack showed one of the assailants outside the Charlie Hebdo offices shouting "Allahu Akbar!" (God is Greatest) as shots rang out.

Another was seen calmly walking over to a wounded police officer lying on the street and shooting him with an assault rifle. The two men then climbed into a black car and drove off.

In another clip, the men are heard shouting in French: "We have killed Charlie Hebdo. We have avenged the Prophet Mohammad."

Charlie Hebdo (Charlie Weekly) has courted controversy in the past with satirical attacks on political and religious leaders of all faiths and has published numerous cartoons ridiculing the Prophet Mohammad. Jihadists online repeatedly warned that the magazine would pay for its ridicule.

Around France, tens of thousands of people joined impromptu rallies and vigils on Wednesday night in memory of the victims - among them some of France's most prominent and best-loved political cartoonists - and to support freedom of speech.

Both the magazine's founder and its current editor-in-chief were among those killed in what emergency services called to the scene described as executions carried out at point-blank range.

Satire has deep historical roots in Europe where ridicule and irreverence are seen as a means of chipping away at the authority of sometimes self-aggrandising political and religious leaders and institutions. Governments have frequently jailed satirists and their targets have often sued, but the art is widely seen as one of the mainstays of a liberal democracy.

French writer Voltaire enraged many in 18th century France with his caustic depictions of royalty and the Catholic Church. The German magazine Simplicissimus in its 70-year existence saw cartoonists jailed and fined for ridiculing figures from Kaiser Wilhelm to church leaders, Nazi grandees and communist activists.

"Freedom assassinated" wrote Le Figaro daily on its front page, while Le Parisien said: "They won't kill freedom".

On Thursday the highest state of alert was still in place, with tightened security at transport hubs, religious sites, media offices and department stores.

The last major attack in Paris was in the mid-1990s when the Algerian Armed Islamic Group (GIA) carried out a spate of attacks, including the bombing of a commuter train in 1995 which killed eight people and injured 150. (Additional reporting by Emmanuel Jarry and Nicolas Bertin; editing by Mark John and Ralph Boulton)