By Adela Suliman

LONDON (Reuters) - Indian Ocean islanders expelled from the British-ruled Chagos archipelago during the Cold War to make way for a U.S. military base will not be given the right to return to resettle, the British Foreign Office said on Wednesday.

The decision, which follows a long and ultimately unsuccessful legal battle by the islanders, was condemned as a betrayal and an injustice by their supporters.

Britain, which has overseen the islands since 1814, allowed the United States to build an air and naval base on Diego Garcia, the archipelago's largest island, 50 years ago.

The existing population of around 1,500 was moved to nearby Mauritius and the Seychelles and effectively barred from returning. Many eventually settled in southern England.

A Foreign Office statement said that the existing arrangement for housing the U.S. base would continue until 2036.

"... the government has decided against resettlement of the Chagossian people to the British Indian Ocean Territory on the grounds of feasibility, defense and security interests, and cost to the British taxpayer," it added.

Britain will instead support the livelihoods of Chagossians in the communities where they now live by funding a package of around 40 million pounds ($50 million) over the next decade, the statement said.

The fund will also support a program of visits back to the islands for native Chagossians.

"In an increasingly dangerous world, the defense facility is used by us and our allies to combat some of the most difficult problems of the 21st century including terrorism, international criminality, instability and piracy," the Foreign Office statement said.

The decision follows a European Court of Human Rights definitive rejection of the exiled residents' case in 2012.

"Its another heartbreaking day for the Chagossian community, who have repeatedly been betrayed and abused by their own government," said UK Chagos Support Association patron and television presenter, Ben Fogle.

Fellow patron and poet Benjamin Zephaniah, called the decision an "injustice" and said it was "just another familiar scenario in a long and tragic episode of British foreign policy".

(Editing by Stephen Addison)