Norway said on Thursday that Iran had confiscated Ebadi's Nobel medal and diploma awarded to her in 2003 from a bank box and that it had summoned Iran's envoy to Oslo in protest.
But the Iranian foreign ministry denied seizing her Nobel medal although it implicitly confirmed that her assets had been blocked on the grounds that no tax had been paid on them.
"Her prize money was deposited in a bank account and it was used to help prisoners of conscience and their families," a founding member of Ebadi's human rights group, Mohammad Ali Dadkhah, told AFP.
"The account has been blocked by the officials and they do not allow withdrawals," the lawyer said.
"This is illegal as blocking and confiscation should be the decision of a court where evidence is presented for such an act," he said. "It is politicized."
Ebadi left Iran shortly before the June 12 presidential election, which saw Mahmoud Ahmadinejad returned to office amid allegations of widespread fraud.
Since then Ebadi has been urging the international community to act against Iranian authorities' human rights "abuses" in the aftermath of the election.
Thousands were initially arrested as mass protests broke out against Ahmadinejad's re-election and dozens were killed in clashes with security forces.
The authorities have also blocked the bank account of Ebadi's husband, Javad Tavassolian, another member of Ebadi's Human Rights Defenders Centre, Mohammad Seifzadeh, said, adding that the group had learned about the freeze about 10 days ago.
Iran is demanding about $400,000 in taxes on Ebadi's prize money, which amounted to 1.3 million dollars, her colleagues said, while arguing that under Iranian law it should not be taxed.
Iran slams Norway's 'biased position'
The Iranian foreign ministry protested against Norway's accusation that it had confiscated Ebadi's medal.
"We are surprised by Norwegian officials taking a biased position with disregard to laws respected by all," foreign ministry spokesman Ramin Mehmamparast said in a statement carried by the state news agency IRNA.
"We do not understand why Norwegian officials ... are seeking to justify people's negligence and refusal to pay tax on assets, and are casting doubt on countries' legal mechanisms.
"We protest at such attitudes," he said.
Seifzadeh saw the move as aimed at "pressuring Ebadi, so that she will be banned from leaving Iran under the pretext of tax evasion whenever she returns."
"It appears that Ahmadinejad's government is bound to increase pressure on dissent to a point that no independent and lawful criticism on human rights can be heard," he said.
Both men, who formed the Human Rights Defenders Centre with Ebadi a decade ago, insisted that the Nobel winner will still return to Iran.
The group has faced mounting pressure since its offices were shut down in a police raid in December 2008.
Two of its members including Dadkhah were jailed for several weeks after the June election and others have been banned from travelling abroad.