Iran faced mounting international pressure on Wednesday after US President Barack Obama raised "significant questions" about the legitimacy of the presidential election and expressed outrage over the crackdown on opposition protesters.
Iran has refused to overturn the results of the poll that returned hardliner Mahmoud Ahmadinejad to power, but supreme leader Ayatollah Ali Khamenei has extended by five days a Wednesday deadline to examine vote complaints.
And one defeated candidate, former Revolutionary Guards chief Mohsen Rezai, has withdrawn his protest about election irregularities, in a blow to the opposition which has staged almost daily demonstrations since the June 12 vote.
"(Iran's) political, social and security situation has entered a sensitive and decisive phase, which is more important than the election," Rezai said in a letter on Tuesday to the Guardians Council, the top election body.
In his strongest comments yet, Obama said on Tuesday there were "significant questions about the legitimacy" of the poll.
"The United States and the international community have been appalled and outraged by the threats, the beatings, and imprisonments of the last few days."
Obama described as "heartbreaking" the shooting on a Tehran street of a young woman, Neda Agha-Soltan, whose death featured on an Internet video seen around the world and has become a poignant symbol for the opposition.
Iran has retaliated against the international backlash, accusing Western governments, particularly major foes Britain and the United States, of meddling in its internal affairs.
Britain said it was expelling two Iranian diplomats after a similar move by Tehran while a number of other European nations have also hauled in envoys to protest at the election and the repression of protests.
Britain, described by Khameini as the "most evil" of Iran's enemies, is also pulling out families of embassy staff and, along with some other European nations, has warned its nationals against travel to Iran.
At least 17 people have been killed and many more wounded in the violence that has convulsed the nation since the vote, according to state media. Many hundreds of protesters, prominent reformists and journalists have also been rounded up by the authorities.
The crisis is the worst in Iran since the Islamic revolution 30 years ago and has jolted the pillars of the clerical regime, with even some top officials raising concerns about the vote.
The Guardians Council, a 12-member unelected body of Islamic clerics and jurists, insisted on Tuesday that the results of the election would stand.
"We witnessed no major fraud or breach," spokesman Abbasali Kadkhodai said on English-language state television Press TV. "Therefore, there is no possibility of an annulment taking place."
The council has acknowledged more votes were cast than there were eligible voters in 50 of the nation's 366 constituencies, but denies major irregularities.
However, Ahmadinejad's main defeated challenger Mir Hossein Mousavi, released a report on "electoral fraud and irregularities" in the election that gave him just 34 per cent of the vote to 63 per cent for the incumbent.
The three-page report on his campaign website called for a "commission of truth and justice acceptable to all the parties to examine the entire election process."
It denounced what it said was "large-scale" official support for Ahmadinejad and spoke of ballot papers being printed on polling day without serial numbers, doubts about whether ballot boxes were empty when they arrived at polling stations and candidates' representatives being banned from vote centres.
Independent British think tank Chatham House said in a report that the results show "irregularities" in the turnout and "highly implausible" swings to Ahmadinejad.
In Washington, analysts say that although the immediate flashpoint is Ahmadinejad's disputed victory, the real struggle now is over the authority of Khamenei, who has been the supreme leader for 20 years.
Tehran's streets remained tense but quiet on Wednesday, two days after the last opposition rally on Monday was crushed by hundreds of riot police armed with steel clubs and firing tear gas.
The Revolutionary Guards -- echoing a call by Khamenei last week -- have warned of a "decisive and revolutionary" riposte to any further protests.
Mousavi, prime minister in the post-revolution era, has urged supporters to keep demonstrating but to adopt "self-restraint" to avoid more bloodshed while another defeated candidate Mehdi Karroubi has called for a mourning ceremony on Thursday for slain protesters.
The foreign media is banned from reporting from the streets under tight restrictions imposed since the unrest was unleashed, but images of police brutality have spread worldwide via amateur video over the Internet.
In the latest crackdown on the media, Iran arrested a British-Greek journalist working for the Washington Times.