Bahraini state minister said on Monday he had been dismissed, following accusations of money laundering which he denied.

The Gulf Arab state's King Hamad bin Isa al-Khalifa issued a decree dismissing the minister, Mansour bin Rajab, without giving a reason, the Bahraini daily al-Wasat said on its website.

Bin Rajab, a minister of state without portfolio, confirmed his dismissal but denied the accusations.

"My dismissal is perhaps aimed at facilitating the ongoing investigation," bin Rajab said in a telephone interview with Al Arabiya television.

"I have the right to defend myself ... and the accusations are completely untrue," he said.

Police earlier said an official had been detained for questioning, without naming him. Local media identified the official as bin Rajab and said he had been released for health reasons after questioning.

"An official has been detained on charges of committing money laundering transactions domestically and abroad," a police statement said.

"The ministry (of interior) noticed the events in early 2009, and therefore monitored the official's activities, meetings and communications closely and secretly," it added, without saying how much money was involved.

Bin Rajab was earlier quoted by Gulf Daily News as saying that prosecutors "merely asked about issues relating to (his) ministry and employees".

Bahrain, which hosts the regional headquarters of anti-money laundering watchdog Financial Action Task Force, issued an anti-money laundering law in 2001.

Reuters