The agency reported that Fereydoun Verdinejad had been freed on bail after paying 180 million riyals ($100,000) demanded by the Tehran court which tries government employees.

Jim Muir: "Mr Verdinejad has long been a target of hardline conservatives"

Charges against Mr Verdinejad have not been published. Correspondents say the move appears to be linked to the continuing power struggle between moderates and conservatives.

Mr Verdinejad is also director of Iran Daily newspaper. Reports from Tehran say a complaint against him in that capacity has been filed by state-run television, some 20 members of the conservative-dominated parliament, the army and the police.

The arrest comes against a background of mounting pressure by hardline conservatives, who dominate the judiciary, on moderate figures in the media.

Both Irna and Iran Daily are considered close to Iran's reformist president, Mohammad Khatami.

Mr Verdinejad has recently been on the receiving of an intense campaign in recent months conducted by religious conservatives who criticise his handling of the news agency and Iran Daily.

A year ago he was acquitted of charges brought against him by police and hardliners at a special press court. The charges were not made public.

Media battles

Other media figures, including a senior official at the Ministry of Culture, Issa Saharkhiz, have been targeted by conservatives.

Mr Saharkhiz was instrumental in helping bring about the explosion of press freedom which has taken place since President Khatami's election two years ago.

He now faces a possible three year jail sentence, at the same court for state employees which has ordered the arrest Mr Verdinejad.

Toilet humour

Reports from Iran point to a number of recently published items which could have triggered the court action against Mr Verdinejad.

Iran Daily is reported to have published a cartoon on 25 May portraying a TV set as a toilet after the re-appointment of a conservative director of Iran's broadcasting authority.

Last week, Irna published an editorial marking the second anniversary of President Khatami's landslide election victory which said the president's democratic reforms could not be reversed.

Tension before elections

These developments come as Iran approaches crucial parliamentary elections early next year.

Hardline conservatives dominate the parliament, or Majlis, but stand to lose control to pro-Khatami reformist candidates if the recent local elections are any guide.

BBC Middle East correspondent Jim Muir says the hardliners are clearly determined not to give up without a struggle.