Both the Information and Foreign ministries established "hit" cells in Iranian embassies, banks, trading firms, and newspaper offices in Europe. But informed Tehran sources say the government, seeking improved European ties, has ordered cells in embassies to be disbanded.
Iranian ministers insist that the Ayatollah's fatwa, or religious edict, cannot be revoked. But they have indicated the government will take no steps to carry it out.
The European Union, for its part, has sought to forge an agreement on Mr Rushdie and the issue is expected to be discussed at a meeting between EU officials and Iranian representatives later this month.
In a letter to Ayatollah Ali Khamenei, successor to Ayatollah Khomeini as Iran's spiritual leader, the Revolutionary Guard commander said to be in charge of the operations, Colonel Mohammad Baqer Ghatibaf, expresses disgust with the about-turn.
"As you know, operation Sajil [the assassination of Salman Rushdie] ordered by Ayatollah Khomeini and confirmed by Ayatollah Khamenei, is being stopped after a government decision, and agents of the Information Ministry stationed at Iranian embassies abroad are ordered to stop co-operation," the colonel states.
"Knowing that Ayatollah Khomeini's fatwa is irrevocable, one has to order the government and the Foreign Ministry to continue their active collaboration or face the wrath of the angry Muslims," the letter warns.
Two days ago, the Foreign Minister, Ali Akbar Velayati, told the BBC "our government is not going to dispatch anybody, any commandos, to kill anybody in Europe".
Mr Rushdie has been in hiding since 1989, when the fatwa was issued after publication of The Satanic Verses, a book many Muslims consider blasphemous.Reuse content