Best supporting actor nominee for ' Little Miss Sunshine'' Alan Arkin and wife Suzanne arrive at the 79th Annual Academy Awards in Hollywood, California February 25, 2007. REUTERS/Lucas Jackson (UNITED STATES)

LOS ANGELES - Alan Arkin won the supporting-actor Academy Award on Sunday for his role as a foul-mouthed grandpa in "Little Miss Sunshine," dashing front-runner Eddie Murphy's hopes of an Oscar for "Dreamgirls."

"More than anything, I'm deeply moved by the open-hearted appreciation our small film has received, which in these fragmented times speaks so openly of the possibility of innocence," Arkin said.

The savage fairy tale "Pan's Labyrinth" took the first two Oscars, for art direction and makeup, the wins for the Spanish-language film kicking off an Oscar evening stuffed with contenders from around the globe.

"To Guillermo del Toro for guiding us through this labyrinth," said art director Eugenio Caballero, lauding the writer-director of "Pan's Labyrinth," the tale of a girl who concocts an elaborate fantasy world to escape her harsh reality in 1940s Fascist Spain.

"Letters From Iwo Jima" won the sound-editing Oscar for Alan Robert Murray and Bub Asman. Murray's father was an Iwo Jima survivor.

"Thank you to my father and all the brave and honorable men and women in uniform who in a time of crisis have all made that decision to defend their personal freedom and liberty no matter what the sacrifice," Murray said.

The record holder for Oscar futility, sound engineer Kevin O'Connell, extended his losing streak to 19 nominations without a win. This time, O'Connell and two colleagues were nominated for sound mixing on "Apocalypto," Mel Gibson's portrait of the savage decline of the ancient Mayan empire, but they lost to another trio of sound engineers that worked on "Dreamgirls."

"Apocalypto" lost in all three categories in which it was nominated, all for technical achievements. Gibson, whose "Braveheart" was the big winner at the 1995 Oscars, had been condemned by many in Hollywood for an anti-Semitic rant he made during his drunken-driving arrest last summer.

Once an evening of backslapping and merrymaking within the narrow confines of Hollywood, the Academy Awards this time looked like a United Nations exercise in diversity.

The 79th annual Oscars feature their most ethnically varied lineup ever, with stars and stories that reflect the growing multiculturalism taking root around the globe.

"What a wonderful night. Such diversity in the room," said Ellen DeGeneres, serving as Oscar host for the first time, "in a year when there's been so many negative things said about people's race, religion and sexual orientation.

"And I want to put this out there: If there weren't blacks, Jews and gays, there would be no Oscars," she said, adding" "Or anyone named Oscar, when you think about that."

In a segment produced by Oscar-winning documentary filmmaker Errol Morris, the show opened with humorous pre-taped moments with nominees, including Clint Eastwood, whose "Letters From Iwo Jima" had nominations including best picture and director, and Peter O'Toole, nominated as best actor for "Venus."

O'Toole, who lost on all seven of his previous nominations, was asked why he did not win for his first nomination as star of the historical epic "Lawrence of Arabia.

"Somebody else did," O'Toole wisecracked.

Eastwood had trouble remembering in what categories "Letters From Iwo Jima" was nominated.

"Picture, director," Eastwood said, pausing. "Things like that."

Competing for best picture was Mexican director Alejandro Gonzalez Inarritu's "Babel," a sweeping ensemble drama. The film's cast ranges from A-listers such as Brad Pitt and Cate Blanchett to comparative unknowns Adriana Barraza from Mexico and Rinko Kikuchi from Japan, who both earned supporting-actress nominations for "Babel."

Also in the running were Stephen Frears' classy British saga "The Queen," a portrait of the royal family in crisis, and Eastwood's Japanese-language war tale "Letters From Iwo Jima."

Those films joined two idiosyncratic American stories nominated for best picture, Jonathan Dayton and Valerie Faris' road comedy "Little Miss Sunshine" and Martin Scorsese's crime epic "The Departed."

Though set among the distinctive cops and mobsters of Boston, "The Departed" had a global connection — it was based on the Hong Kong crime thriller "Infernal Affairs."

Gray clouds floated over the red carpet as limousines delivered guests to the Kodak Theatre, but the hint of rain didn't diminish the enthusiasm of spectators as the likes of Maggie Gyllenhaal, James McAvoy, Al and Tipper Gore and Melissa Etheridge passed by.

"I don't think there's any pageant in the world that matches the Oscars," said Gore, whose "An Inconvenient Truth" was nominated for best documentary feature and best original song, "I Need to Wake Up," by Etheridge.

"Every star under the sun is here. It don't get no bigger than this," said Jennifer Hudson, the supporting-actress front-runner for "Dreamgirls."

Of the 20 acting nominees, five were black, two were Hispanic and one was Asian, while only two Americans?- Eastwood and Scorsese?- were among the five best-director contenders.

With a Directors Guild of America award and other top film honors behind him, Scorsese was considered a shoo-in to earn the directing Oscar, a prize that has eluded him throughout his illustrious career.

The best-picture race was up for grabs, with all five films in the running but many Oscar watchers generally figuring it was a three-way race among "Babel," "The Departed" and "Little Miss Sunshine."

Organizers at the Academy of Motion Picture Arts and Sciences hope the suspense of the wide-open best-picture category will help offset moviegoers' relative lack of interest in the competing films.

TV ratings for the Oscars tend to be lower when fewer people have seen the top nominees. Collectively, the five best-picture nominees had drawn a total domestic theatrical audience of about 38.5 million people, about a third the number of fans who have gone to see the contenders in recent peak years when such blockbusters as "Gladiator" or "The Lord of the Rings: The Return of the King" have won.