Norway reacted with fury after Iran seized Nobel Peace laureate Shirin Ebadi's medal and other pro-democracy accolades.
The move against the human rights lawyer and Iran's first female judge comes amid increasingly drastic steps by Tehran against any dissent.
In Norway, where the peace prize is awarded, foreign minister Jonas Gahr Stoere called the move "shocking" and the first such incident in the history of the 108-year-old prize.
The Norwegian foreign ministry summoned Iran's charge d'affaires in Norway on Wednesday to protest at the seizure, spokeswoman Ragnhild Imerslund said.
The ministry also "expressed grave concern" about Ms Ebadi's husband, who it said was arrested in Tehran and "severely beaten" earlier this autumn, after which his pension and bank account were frozen.
The Norwegian Nobel Committee's permanent secretary, Geir Lundestad, said the move was "unheard of" and "unacceptable" and the committee would send a letter of protest to Iranian authorities.
The Iranian embassy in Norway did not comment.
Ms Ebadi won the Nobel Peace Prize in 2003 for her efforts in promoting democracy. She has long faced harassment from Iranian authorities for her activities - including threats against her relatives and a raid on her office last year in which files were confiscated.
The seizure of her prize is an expression of the Iranian government's harsh approach to anyone it considers an opponent - particularly since the massive street protests triggered by hardline President Mahmoud Ahmadinejad's disputed June 12 re-election.
Acting on orders from Tehran's Revolutionary Court, authorities took the peace prize medal about three weeks ago from a safe-deposit box in Iran, Ms Ebadi said in a phone interview from London.
They also seized her Legion of Honour and a ring awarded to her by a German association of journalists, she said.
Authorities froze the bank accounts of Ms Ebadi and her husband and demanded £245,000 in taxes they claimed were owed on the £780,000 she was awarded.
Ms Ebadi said such prizes were exempt from tax under Iranian law and claimed the government also appeared intent on trying to confiscate her home.
Ms Ebadi, the first Muslim woman to be awarded the peace prize, said she would not be intimidated and that her absence from the country since June did not mean she felt exiled.
"Nobody is able to send me to exile from my home country," she said. "I have received many threatening messages. ... They said they would detain me if I returned, or that they would make the environment unsafe for me wherever I am.
"But my activities are legal and nobody can ban me from my legal activities."
Ms Ebadi has criticised the Iranian government's crackdown on demonstrations by those claiming the June vote was stolen from a pro-reform candidate through massive fraud.
She left the country a day before the vote to attend a conference in Spain and has not returned since. In the days after the vote, she urged the international community to reject the outcome and called for a new election monitored by the United Nations.
During the past months, hundreds of pro-reform activists have been arrested and a mass trial has sentenced dozens to prison terms. Authorities also went after Ms Ebadi's human rights centre in Iran.
"After the election all my colleagues in the centre were either detained or banned from travelling abroad," she said.
Calls to Iranian judiciary officials were not returned.
Ms Ebadi said her husband, Javad Tavassolian, and her brother and sister had been threatened many times by authorities pushing them to persuade her to end her human rights campaigning.