Iran's Fars news agency Photoshops First Lady's dress to cover up her neckline in coverage of Academy Awards ceremony

Iran's semi-official Fars news agency Photoshopped pictures of Michelle Obama at the Oscars to conform to Iranian restrictions on images of the female body in the media.

Fars, which is affiliated to the Islamic republic's elite Revolutionary Guards, redesigned the US first lady's dress so that it covered her chest and shoulders in a picture showing her announcing that Argo had won best picture, via a video link from the White House.

Rules dictate that Iranian women shown on Iran's state television should have a hijab that covers their hair, arms and legs. The length of the censor's ruler varies for foreigners. A foreign woman travelling inside the Islamic republic should comply with the same restriction on Iranian women, but those shown on TV, such as dignitaries or actors, are tolerated without the hijab, up to a point.

Men enjoy relatively more freedom, but only sportsmen are allowed to be shown with bare legs on TV.

When Iranian media are obliged to use a picture that contravenes these rules, it is not unusual for Photoshop to come to their rescue. Many foreign dignitaries and celebrities have fallen victim to the Islamic republic's censorship regime, including the EU's foreign policy chief, Catherine Ashton.

When showing foreign films, state TV censors can go as far as editing the film frame by frame in order to cover up actors or delete them from a scene.

Fars was also infuriated by the Academy's decision to honour Argo, which it described as an "anti-Iranian" film produced by the "Zionist" company Warner Bros – an objection echoed by many other state agencies.

A large number of Iranians – even those not necessarily sympathetic to Ahmadinejad's regime – have taken to social networking websites to show discontent with Argo's win, which they believe stereotypes Iranians in a negative way without drawing a distinction between ordinary citizens and the revolutionaries behind the US hostage crisis.

In January, officials in Tehran said they were intending to retaliate to Argo by making their own film about the hostage crisis, to be called The General Staff, which is promised to be an "appropriate response" to Ben Affleck's "ahistorical" thriller.

Last year, Asghar Farhadi's film A Separation became the first Iranian film to win an Oscar – for best foreign language film – prompting national celebrations.