Bahraini authorities have blamed Iran's Revolutionary Guard for setting up a terrorist cell to murder public figures in the tiny Gulf kingdom and attack its airport and government buildings.

Bahraini security forces arrested eight members of a cell with alleged links to Iran, Iraq and Lebanon. The kingdom's head of public security said the cell was part of a larger group called the 'Imam Army'.

"The investigation has also revealed that a member of the Iranian Revolutionary Guard codenamed 'Abu Nasser' masterminded the whole terror operation," Maj-Gen Tariq Hassan al-Hassan said.

Hassan added that Abu Nasser funded the group with $80,000 to gather information, recruit and obtain weapons in Bahrain.

Its targets were the ministry of the interior and Bahrain airport, and the group attended training camps run by the Revolutionary Guard inside Iran, according to Hassan. Some militants were also controlled by the Iraqi branch of Hezbollah, operating in the cities of Baghdad and Kerbala.

Authorities gathered evidence in the form of papers and electronic documents, flashcards, phones, computers, cash and images of bank transactions.

However, Iranian foreign ministry spokesman Ramin Mehmanparast has rejected rumours of the arrests.

"Unfortunately Bahraini officials are following a mistaken path," Iran's ISNA news agency quoted him as saying.

He said Bahraini officials were "making accusations against various countries including Iran, and they imagine that in this way they can solve the problem they are encountering".

The development came after pro-democracy protests erupted across Bahrain during the second anniversary of the country's uprising, following news that a 16-year-old boy had been killed by police.