The development follows hectic parleys between the two countries with India strongly objecting to the detention, saying it was a "colourable" exercise in transgression of UN convention on the laws of the sea and warning of serious ramifications.
"Iran has ordered release of the Indian oil tanker," a source in the Ministry of External Affairs said.
Meanwhile, the Shipping Ministry also indicated the possibility of positive developments and were awaiting the confirmation on the actual release of the vessel MT Desh Shanti.
The tanker belonging to India's largest ocean liner SCI was seized by Iranian Revolutionary Guards Corps (IRGC) on August 12 citing environmental and pollution concerns.
India, however, strongly objected to pollution charges saying the vessel on a "innocent passage" from Basrah to Visakhapatnam was not voluntarily destined at any Iranian ports, and was "forcibly diverted" to Iranian waters and then subject to PSC inspection.
In a strong-worded letter to Iran, India had made it clear that Port State Control (PSC) is a legitimate mechanism to be utilised prudently and "any arbitrary enforcement of this well-established regime can have serious ramifications on the smooth conduct of international maritime transport and may send alarming messages to the shipping community...
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