LAHORE A Pakistani headteacher caught in a blasphemy row over a piece of homework allegedly containing derogatory references to the prophet Mohammed (PBUH) was Wednesday released on bail, his lawyer said.

Asim Farooqi of Farooqi Girls' High School, was released after the Lahore High Court granted him bail against a 200,000 rupee ($2,100) surety, his lawyer Jawad Ashraf told AFP.

A lower court had early this month refused bail and remanded Farooqi in custody for 14 days on charges of blasphemy, which can attract the death penalty, despite arguments he had no direct part in the case.

A teacher, Arfa Iftikhar, was forced into hiding after a furious mob stormed the school in the eastern city of Lahore over a piece of homework she set. Police are still hunting for her.

Blasphemy is an extremely sensitive issue in Pakistan, where 97 per cent of the population are Muslims, and allegations of insulting Islam can prompt violent outbursts of public anger, even when unproven.

The school management took out front page adverts in two leading newspapers after the incident to deny any knowledge of the supposed insults, saying Iftikhar distributed the work just 10 minutes before the school closed for the Eid al-Adha holiday.

Activists say Pakistan's harsh blasphemy laws are often abused to settle personal scores, and Ashraf said the possibility of a conspiracy against the school, one of the most successful in Lahore, could not be ruled out.