Tehran: An Iranian actress sentenced to be whipped for her role in an Australian-produced film has been spared the lashes and been freed after having her term reduced on appeal, a source close to her family confirmed on Saturday.

Marzieh Vafamehr had her original punishment of a year in prison and 90 lashes cut to the three months detention already served and a USD 1,000 fine instead of the whipping, the source said on condition of anonymity.

The source confirmed information given by Amnesty International in London that Vafamehr was freed this week.

News of Vafamehr's initial sentence sparked alarm and outrage in Australia, where the makers of the film, "My Tehran for Sale", stressed that it had obtained the necessary Iranian permission to be made in Tehran.

The Australian production company behind the movie, Cyan Films, based in Adelaide, expressed "deep shock and sadness" at the original sentence.

A spokesman for Australian Foreign Minister Kevin Rudd had also spoken of "deep concern" over the case.

Iran's Fars news agency said the film - which contains a scene showing Vafamehr with a shaved head and not wearing the headscarf obligatory under Iran's Islamic laws - had not been approved for distribution in the country and was being distributed there illegally.

Shot entirely in Tehran and directed by Iranian-Australian Granaz Moussavi, the 2008 film tells the story of a young actress in Iran's capital whose work is banned by the authorities. It was partially funded by the South Australian Film Corporation.

Iranian cinema has come in for harsh repression in recent years, with several filmmakers and intellectuals close to the opposition being singled out by authorities following the disputed 2009 re-election of President Mahmoud Ahmadinejad.

More than a dozen directors and actors have been arrested, and some have been handed stiff sentences for "propaganda against the regime," including a number of documentary makers accused of blackening the image of Iran.

The most prominent of them, internationally recognized Director Jafar Panahi, has been sentenced to six years in prison and slapped with a 20-year ban on filmmaking, travelling or giving interviews after trying to make a documentary about the unrest that followed the 2009 election.