"All activities of the Reuters office in Tehran have been temporarily suspended," said Mohammad Javad Aghajari, the Culture Ministry foreign media department director general, IRNA said.
The controversy stems from a Reuters video showing women clad head to toe in black, running up walls and flipping backwards and diving and rolling over swords held at waist heights.
The Culture Ministry official accused Reuters of calling the martial arts students terrorists, when in fact they are "university students and housewives" who "engaged in this sport because of their love for the sport."
Reuters acknowledged the video report in February "contained an error" and that the headline was changed after a complaint.
The story's headline, "Thousands of female Ninjas train as Iran's assassins," was corrected to read "Three thousand women Ninjas train in Iran," Reuters said in a statement.
Eleven Reuters staff members in Tehran were told to hand in their press cards over the incident, Reuters said.
""We acknowledge this error occurred and regard it as a very serious matter," editor-in-chief Stephen J. Adler said, saying the company "conducted an internal review and have taken appropriate steps to prevent a recurrence."
He said Reuters was in talks to restore its journalists' accreditation.
IRNA said authorities would review the case.
Iran's own government-run Press TV ran a similar video story earlier in the year showing even more frenetic martial arts moves, including women leaping onto each other's shoulders and flipping them over.
