Five Iranian officials have been released two years after being detained by the US military, Iran's ambassador to Baghdad has said.

Hassan Kazemi Qomi told Iran's semi-official Fars news agency that the men had been handed over to the Iraqi authorities on Thursday and would soon be taken to the Iranian embassy.

"Five Iranian diplomats kidnapped by American occupying forces have been handed over to Iraq's prime minister," he said.

US forces seized five Iranians in the northern Iraqi town of Irbil in January 2007 saying that they suspected them of arming and funding Shia groups in Iraq.

Two Iranians were released later that year and Iranian media reports did not clarify the apparent discrepancy.

The five Iranian men were identified by Iran's state broadcaster as Mohsen Bagheri, Mahmoud Farhadi, Majid Ghaemi, Majid Dagheri and Abbas Jami. 

The arrests triggered a diplomatic row with Tehran accusing Washington of violating diplomatic regulations by entering its consulate.

US officials claimed that the five captured in Irbil were either members or "associates" of the Iranian Revolutionary Guard's elite Quds Force.

But Iran insisted that all five detained were diplomats working to prepare the consular office.

Hoshyar Zebari, Iraq's foreign minister, said that the five Iranians had been working in Irbil with official sanction, but that their "liaison office" had not yet become a full consulate.