Iran has rejected as "ridiculous" claims by Manama that it has links to a "terrorist" cell busted in Bahrain, state television's website reported on Monday.
Amir Abdolahian, a deputy foreign minister in charge of Arab and African affairs, was quoted as saying that the "baseless allegation is repeating a ridiculous scenario fabricated by the United States."
"Intensifying the security atmosphere in Bahrain and pursuing the ineffective policy of Iranophobia will not lead to solving the problem," the website quoted him as saying.
"It is necessary for the Bahraini officials, instead of deflecting (their problems) and making these baseless allegations, to work on trust-building to solve the chasm created between the regime and the people," Abdolahian added.
In response, Bahrain's foreign ministry said on Monday it was "surprised" by the comments that "contradict the principles of diplomacy, good neighbourhood, and rules of international conduct," the Bahraini news agency BNA reported.
The foreign ministry said Abdolahian's comments amounted to "blatant interference" in the kingdom's internal affairs.
It said "terrorist organisations linked to Iran are without the least doubt involved in spreading terrorism and undermining security and stability in the region, which threatens world peace and security."
Bahrain's judiciary on Sunday linked a busted "terrorist" cell to Iran's Revolutionary Guards, a day after announcing the arrest of five Bahrainis planning attacks in the Arab kingdom.
The five men are accused of belonging to a "terrorist group" with ties to the intelligence services of a foreign state, a judiciary spokesman said, quoted by BNA.
The spokesman said the five were to be "sent to Iran to receive military training," notably with the elite Revolutionary Guards.
On Saturday, Bahrain's interior ministry said a cell had been broken up that was planning to attack the ministry, the Saudi embassy in Manama and the causeway which links the archipelago state to Saudi Arabia.
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Citing alleged confessions from the suspects, the judiciary spokesman said the cell had been set up by two men living abroad.
"They coordinated with military structures abroad, including the Revolutionary Guards and the Basij (militia) in Iran to train the recruits of the group in handling arms and explosives," he said.
The Sunni-ruled Arab monarchies of the Gulf have repeatedly accused mainly Shiite Iran of meddling and of inciting the Shiite-led protests which rocked Bahrain for a month from mid-February.
The Bahraini government crushed the pro-democracy protest with the help of Gulf Cooperation Council troops, drawing condemnation from Tehran.
Relations between Iran and its Arab neighbours in the Gulf have deteriorated in the past year amid accusations that Tehran is fomenting unrest, engaging in espionage or planning attacks.
The accusations have been vehemently denied by Tehran, which says its neighbours have become Iranophobic.
Saudi Arabia accused Iran in October of being behind the unrest in its northeastern region of the kingdom which has a Shiite population.
It has also said it is "holding Tehran accountable," after the United States said it had uncovered "plot" to assassinate the Saudi ambassador in Washington.
In July, Bahrain sentenced three people to 10 years in prison after finding them guilty of charges of spying for the Revolutionary Guards.
Iran, meanwhile, on Sunday announced the arrest in the southern city of Abadan of two Kuwaitis it said were spies.
Kuwait denied those arrested are spies, saying they are journalists working for a television channel who had entered Iran on valid visas.