US-born journalist Roxana Saberi walked free on Monday after an Iranian appeals court cut her eight-year jail sentence for spying to a suspended two-year term.

Her release resolved a case that had further strained US-Iranian relations, at a time when US President Barack Obama is seeking to reach out to Tehran after three decades of mutual mistrust.

A judiciary source said Saberi, who was jailed on April 18 on charges of spying for the United States, could leave Iran, and her father suggested it would happen soon.

"Roxana is well and is staying at a relative's home tonight ... The exact date of our departure is not clear but we should get ready for our trip to America," said Reza Saberi, who moved to the United States in the early 1970s.

He was speaking after the 32-year-old freelance journalist was released from Tehran's Evin prison, where rights groups say political prisoners are usually held.

A citizen of both the United States and Iran, Saberi was arrested in late January for working in the Islamic Republic after her press credentials had expired. She was later charged with espionage, a charge that can carry the death sentence.

The United States had said the spying charges against Saberi, who moved to Iran six years ago, were baseless and demanded her immediate release.

The two countries were already locked in an acrimonious dispute over Iran's nuclear programme, which the West fears is aimed at making weapons. Iran flatly denies this, saying it only wants to generate electricity.

Obama has offered a new beginning of engagement with Tehran if "you are willing to unclench your fist." Iran says the United States must show real change in policy towards it.

Saberi, who has worked for the BBC and US National Public Radio, was released one day after a Tehran court held a hearing on her case that was closed to the public.

Iranian President Mahmoud Ahmadinejad last month called for Saberi to be given full legal rights to defend herself and Foreign Minister Manouchehr Mottaki said her sentence would be reviewed based on "human and Islamic kindness".

"I'm very satisfied and happy about the ruling. We expected her to be freed but not this soon," said Reza Saberi, 68, who came to Tehran last month with his Japanese wife Akiko to follow their daughter's case.

One of her defence lawyers, Saleh Nikbakht, told the ISNA news agency the court had acquitted her of spying but sentenced her under a law covering violations including taking pictures or videotaping in areas where photography is banned.

She would be banned from doing any reporting work in Iran for five years, her main lawyer, Abdolsamad Khorramshahi, said.

Saberi, a former Miss North Dakota, looked thin and tired at Sunday's court session. Last week, her father said she had ended a two-week hunger strike and was "very weak". The judiciary denied she had refused food and said she was in good health.

Tehran, which does not recognise dual nationality, said throughout the case that Washington should respect the independence of Iran's judiciary. - Reuters