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Theodor "Teddy" Kollek, who served as Jerusalem mayor for more than a generation, will be laid to rest in state funeral in Jerusalem on Thursday, Israel Radio reported.

Flags over city hall were lowered to half-staff following news that the legendary mayor, who shepherded the transition of Jerusalem from a Mideast backwater with a glorious past to a world capital of culture and politics, had died at the age of 95 on Tuesday.

"Teddy was Jerusalem and Jerusalem was Teddy," Mayor Uri Lupolianski said Tuesday. "With his spirit and personality he symbolized the true unified Jerusalem, the capital of Israel. The city of Jerusalem and the entire state are indebted to Teddy for his tremendous contribution to the people of Israel, the state and its capital."

Named after Theodor Herzl, Kollek served as mayor from 1965 until 1993, elected to the position six times until his defeat at the hands of Ehud Olmert. His building and restoration projects were said to have been Jerusalem's most ambitious since the 16th-century Turkish Sultan Suleiman the Magnificent erected the walls of the Old City.

"The name of Kollek will remain forever a part of the Jerusalem scene," said Olmert. "The government and people of Israel bow their heads in deep sorrow at the passing of one of the giants among the founding fathers of the state."

His death was mourned by political leaders around the world. German President Horst Koehler described Kollek's death as "a great loss" for Israel.

"Teddy Kollek extended the hand of conciliation to Germans at an early stage and was personally committed to reconcilement between the German and Jewish peoples," Koehler said in a condolence telegram to Kollek's widow.

Former New York City Mayor Ed Koch called Kollek the "mayor of all mayors," in an interview with Channel 10.

'Better united than divided'Kollek liked to be called Teddy by all, and during his long years in office he walked the streets without a bodyguard. Though deemed Jerusalem's greatest builder since King Herod, his home number was in the phone book for complaints about potholes or pleas for a new playground.

A tireless campaigner for co-existence in one of the world's most contentious metropolitan areas, Kollek once said that, "We proved that Jerusalem is a better city united than divided."

"Jerusalem's people of differing faiths, cultures and aspirations must find peaceful ways to live together other than by drawing a line in the sand," he said.

During World War Two, Kollek helped Allied intelligence to contact the Jewish underground in Nazi-occupied Central and Eastern Europe. He later helped lead the pre-state Haganah.

Within days of the end of the 1967 Six-Day War, Kollek ordered the stone wall which had divided Jerusalem to be torn down. He worked energetically to win the respect, if not always the affection, of the Palestinian population in East Jerusalem. He left no doubt that he wanted Jerusalem to remain undivided under Israeli sovereignty, despite Palestinian demands that East Jerusalem be the capital of a future state.

Kollek was also admired for his efforts to balance the needs and demands of secular Jews and the city's ultra-orthodox Jewish community. He promoted special housing projects for the ultra-Orthodox, locating them far from main roads to distance them from Sabbath traffic.

He fought attempts by zealous Jews to move into the Muslim quarter of the walled Old City, but defended the practice of developing Jewish suburbs around the eastern Arab sector to prevent it from ever escaping Israel's rule.

Kollek aides later admitted that during his decades in office, the city's master plan was aimed at preserving the population balance at 28 percent Arabs and 72 percent Jews. To solidify Israel's hold over the eastern sector of the city, Kollek presided over the construction of nine Jewish neighborhoods, moving 160,000 Jews into the area.

He also worked to respect the needs of the competing religious and secular Jewish populations. As mayor, he pushed through a sports stadium that pleased the secular and angered the religious. In return, he pledged that a nearby shopping center would always be closed on the Sabbath.

"He wanted to be the patron of all Jerusalem, of all its communities," former parliament speaker Reuven Rivlin, who led the opposition in city council during Kollek's reign, told Army Radio.

He even earned grudging respect from the city's Palestinians.

'He knew what Jerusalem meant to the world'Mahdi Abdul-Hadi, a Palestinian academic and longtime Jerusalem resident, said Kollek's relations with Jerusalem's Palestinians were complex.

He helped build Jewish communities in east Jerusalem and razed an Arab neighborhood in the Old City to create a plaza in front of the Western Wall. But he also reached out to some Palestinians and tried to build bridges with them, he said.

"Previous mayors were nobody in Jerusalem. They sat around in their offices not knowing what Jerusalem meant," Abdul-Hadi said. "Teddy Kollek knew what Jerusalem meant to the world ... Very few people will grasp that opportunity and grasp that moment, that event and take advantage of it."

Born near Budapest, Kollek grew up in Vienna. In 1935, with Nazi Germany threatening to take control of Austria, Kollek moved to British Mandatory Palestine, helping to found Kibbutz Ein Gev.

In 1952 he became part of group of close advisors to Israel's founding prime minister David Ben-Gurion, a circle that included Shimon Peres and other figures of what would become the modern Labor Party.

Taking office two years before the 1967 war that formally united the Jewish western and Arab eastern halves of the holy city, Kollek transformed the landscape of Jerusalem, spearheading a green belt in the west which includes parks, the prestigious Israel Museum, a botanical gardens and a biblically themed zoo. In recognition of his major public works projects, the city named the modern soccer arena he envisaged, the Teddy Stadium, after him.

In 1988, Kollek was awarded the nation's highest civilian honor, the Israel Prize, for his contributions to building the modern Jerusalem.

Kollek also established the Jerusalem Foundation, which raises money for the development of the capital.

The president of the Foundation, Ruth Cheshin, paid tribute to Kollek on Tuesday, calling him "a unique and special man, who saw all residents of the city, Christian, Jew and Muslim as equal partners and wanted to make the city into a beacon of hope for all its residents."

Kollek is survived by his widow Tamar, son Amos and daughter Osnat.