A senior prosecutor said today that Iran will release US hiker Sarah Shourd on bail, as he criticised members of President Mahmoud Ahmadinejad's government for interfering in judicial issues.

Tehran prosecutor Abbas Jafari Dolatabadi said that Shourd, one of three American hikers detained in Iran for more than a year, had been granted bail on health grounds on a surety of around 500,000 dollars.

"For the female defendant (Shourd), bail has been set at five billion Iranian rials (around 500,000 US dollars)," the official IRNA news agency quoted Dolatabadi as telling reporters.

"She can be freed by posting the bail... Her lawyer has been informed," he said, adding that the decision was taken after "the judge confirmed Ms. Shourd's illness."

Shourd's mother Nora told AFP last month that her daughter was being held in solitary confinement despite suffering from a pre-cancerous cervical condition, a lump in her breast and depression.

Shourd was arrested with fellow hikers Shane Bauer and Josh Fattal on July 31, 2009 after straying across the border from neighbouring Iraq.

Lawyer Masoud Shafii, who is defending the three hikers, told AFP that his clients have been charged with "espionage and illegal entry," but they have "rejected the charges."

The three previously insisted they entered Iran by mistake after getting lost during a trek in Iraqi Kurdistan.

Several Iranian officials had said on Thursday that Shourd would be released on Saturday. But legal technicalities delayed her release, Dolatabadi said on Friday.

Shourd's release could ease tensions between Washington and Tehran, which have heightened in recent months over Iran's controversial uranium enrichment programme.

Her case has highlighted deep divisions between Ahmadinejad's government and institutions run by traditional conservatives such as Ayatollah Sadeq Larijani, who heads the judiciary.

Larijani last month hit out at Ahmadinejad over remarks he made about a separate legal case, while his brother, parliament speaker Ali Larijani, has repeatedly criticised the president over his handling of the economy.

On Sunday, Dolatabadi criticised the government directly, saying that "releasing information on judicial cases should not be done by government officials, and judicial authorities should handle it."

Officials, including Ahmadinejad, had previously said the three American hikers could be swapped for Iranian citizens in US custody.

Talk of such an exchange emerged when the United States allowed the return home of Iranian researcher Shahram Amiri who surfaced in Washington in July after going missing in Saudi Arabia last year.

However the Fars news agency quoted Dolatabadi as saying there was "no link" between Amiri's case and that of the Americans.

He reiterated that the three hikers were accused of espionage.

"The case is nearly complete and the judge has issued an indictment for the three Americans accused of spying," he said, adding that Bauer and Fattal had been remanded in custody.

"It has been proven that they illegally entered through the Kurdistan border. Also the equipment and supplies they were carrying are only used for spying," the Mehr news agency quoted Dolatabadi as saying.

Shafii said he went to court on Sunday with his clients, after which he told the Swiss embassy and the hikers' families about Shourd's bail.

"As soon as the bail amount is ready, Sarah can be released," he said, and added that the period of detention for Bauer and Fattal had been extended by two months.

"We have objected to the extended detention," he said. Shafii also said that no trial date has yet been fixed.

The Swiss embassy manages US interests in Iran as Washington and Tehran have had no direct diplomatic ties since the 1979 Islamic revolution.

Washington, including President Barack Obama, and human rights watchdogs have called on Iran to release the three hikers.

In May, Iran allowed visits to the trio by their mothers, who reported that Shourd and Bauer had become engaged while behind bars.

The website freethehikers.org gives Shourd's age as 32, and says Bauer and Fattal are both 28.