Hossein Moussavian was given a two-year suspended prison term and banned from holding posts in diplomacy or foreign policy in the next five years, his lawyer Houshang Pour Babaie was quoted as saying by the student ISNA news agency.

Moussavian was a leading nuclear negotiator in the moderate team that agreed a temporary suspension of sensitive nuclear activities with EU countries during the presidency of reformist Mohammad Khatami.

Ahmadinejad reversed the suspension shortly after coming to power in 2005 and has since lashed out at the ex-negotiating team for yielding to the West in the nuclear standoff.

The news of Moussavian's conviction came on a new national day celebrating the Iranian nuclear drive where Ahmadinejad announced that Iran was to expand its atomic programme by installing 6,000 centrifuges for uranium enrichment.

Ahmadinejad had openly accused Moussavian of being a spy while his intelligence minister Gholam Hossein Mosehni Ejeie had said he supplied nuclear secrets to the British embassy in Tehran.

The president has launched withering attacks on his opponents who he denounced as "traitors" for questioning his confrontational stance in the nuclear standoff with the West.

Moussavian was briefly detained and then released on bail in May 2007. The Iranian judiciary then cleared him of espionage charges in November 2007, infuriating the government which wanted to see him stand trial.

But Tehran's hardline prosecutor Saeed Mortazavi, ordered a new probe into the case of Moussavian, who is a close ally of the influential former president and Ahmadinejad rival, Akbar Hashemi Rafsanjani.

His sentencing appears to have finally brought the case to a close.

Pour Babaie confirmed that Moussavian had been acquitted of espionage charges and was issued with a legal document confirming that the investigation against him had been concluded.

Moderates inside Iran have slammed Ahmadinejad's confrontational rhetoric and pushed for iRAN TO pursue its nuclear rights through talks and building confidence with the international community.

Moussavian, also a former ambassador to Germany, was the deputy head of a research institute led by Hassan Rowhani, who was Iran's top nuclear negotiator under Khatami and has since been bitterly critical of Ahmadinejad.

Under the Ahmadinejad government, contacts between Iranians and Western embassies in Tehran have become a highly sensitive issue.

Last month, Mohammad Reza Khatami, a leading reformist and the brother of the former president, was lambasted by hardliners for meeting the German ambassador ahead of the latest nuclear sanctions against Tehran.

Iran insists it has a right to enrich uranium to make nuclear energy to meet the growing needs of its population and denies seeking atomic weapons as alleged by the United States and its allies.

Pour Babaie said that Moussavian could still serve in state bodies for the next five years and was only banned from posts concerning foreign policy or diplomacy.

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