The United States on Friday removed an Iranian opposition group, the People's Mujahedeen of Iran, from its blacklist of designated terror groups after years of intense lobbying.

The move, ending a complex legal battle fought through US and European courts, came just days ahead of a US appeals court October 1 deadline forcing Secretary of State Hillary Clinton to decide the group's fate.

The State Department said that Clinton decided "to revoke the designation of the Mujahedeen-e-Khalq (MEK) and its aliases as a Foreign Terrorist Organization (FTO) under the Immigration and Nationality Act and to delist the MEK as a Specially Designated Global Terrorist under Executive Order 13224."

The MEK, whose leadership is based in Paris, has invested much money and years of intense lobbying to be taken off the list.

The cult-like leftwing group was founded in the 1960s to oppose the shah of Iran, and after the 1979 Islamic revolution that ousted him it took up arms against Iran's clerical rulers.

MEK leader Maryam Rajavi said in a statement from Paris that she "welcomed and appreciated" Clinton's decision to delist the movement.

"This has been the correct decision, albeit long overdue, in order to remove a major obstacle in the path of the Iranian people's efforts for democracy," she said in the statement.

A group of MEK members waved Iranian flags, danced and sang in Farsi at a sidewalk celebration outside the main State Department entrance. The group, which included people of all ages, occasionally chanted "Thank you, thank you!" in English.

The MEK says it has now laid down its arms and is working to overthrow the Islamic regime in Tehran through peaceful means.

But in its note about delisting the MEK, the State Department stressed that it had not forgotten the group's militant past.

"With today's actions, the Department does not overlook or forget the MEK's past acts of terrorism, including its involvement in the killing of US citizens in Iran in the 1970s and an attack on US soil in 1992," it said.

"The department also has serious concerns about the MEK as an organization, particularly with regard to allegations of abuse committed against its own members."

A senior US official said that Washington does "not see the MEK as a viable opposition."

"We have no evidence and we have no confidence that the MEK is an organization that could promote the democratic values that we would like to see in Iran," the official told reporters. "They are not part of our picture in terms of the future of Iran."

Washington designated the MEK a "foreign terrorist organization" in 1997, putting it in a category that includes Al-Qaeda, the Palestinian Hamas and Lebanon's Hezbollah.

The State Department holds the group responsible for the deaths of Iranians as well as US soldiers and civilians from the 1970s into 2001.

It said that Clinton's decision to delist the group "took into account the MEK's public renunciation of violence, the absence of confirmed acts of terrorism by the MEK for more than a decade and their cooperation in the peaceful closure of Camp Ashraf, their historic paramilitary base" in Iraq.

Part of the conditions for delisting the group were that more than 3,200 MEK members living at Camp Ashraf in Iraq's Diyala province, northeast of Baghdad, move to another area called Camp Liberty.

Earlier this month, the last major group of the Iranian exiles relocated from the camp that former Iraqi leader Saddam Hussein had allowed them to use.

The exiles were moved under a December 25 deal between the United Nations and Baghdad that aims to see them eventually relocated to third countries.

The MEK has no support in Iran, and no connection to domestic opposition groups.

Britain struck the MEK off its terror list in June 2008, followed by the European Union in 2009.

In June, the US Court of Appeals in Washington said that if Clinton did not decide whether to deny or grant the group's request to be delisted within four months, it would issue a special writ and remove the group itself.