"Taxi" is Panahi's third picture smuggled out of Iran in defiance of an official 20-year filmmaking ban, imposed for a documentary he tried to make on the unrest following Iran's disputed 2009 presidential election.

Panahi, who is also barred from travelling abroad and could not attend the festival, said Sunday he was pleased about the award but wished cinemagoers in Iran could watch his films.

"No prize is worth as much as my compatriots being able to see my films," he said in a rare interview with Iranian media.

"The people in power accuse us of making films for foreign festivals," he told the semi-official Ilna news agency on behalf of Iranian directors. 

PHOTO GALLERY: See more Berlinale winners!

"They hide behind political walls and don't say that our films are never authorised for screening in Iranian cinemas."

Hollywood director Darren Aronofsky, the jury president at the 65th Berlinale, said at a gala awards ceremony late Saturday that Panahi had surmounted restrictions that had the power to "damage the soul of the artist".

"Instead of allowing his spirit to be crushed and giving up, instead of allowing himself to be filled with anger and frustration, Jafar Panahi created a love letter to cinema," Aronofsky said.

The 54-year-old Panahi's young niece Hana Saeidi, who appears in "Taxi" along with the director, wept as she picked up the statuette for him and held it aloft for the cameras.

German Foreign Minister Frank-Walter Steinmeier hailed the choice among 19 films in the competition as "an important symbol for artistic freedom", as commentators noted the principle was under threat around the world.

Berlin newspaper Der Tagesspiegel wrote in a front-page editorial Sunday that the festival had shown that "especially in these days of global unrest, art and political consciousness can light a beacon".

News website Spiegel Online said the Golden Bear sent "an important message against the restriction of art", calling it a "triumph for free speech".

"The Berlinale remains political," it said, noting the festival's reputation for championing edgy, topical cinema.

Saeidi wept "tears of joy that the world took note of the fate of her uncle, standing in for many more artists threatened with censorship and repression in Iran and other countries that restrict artistic and personal freedom," it said.

Panahi's last movie shot in secret, the 2013 elegiac "Closed Curtain", won a Silver Bear in Berlin for best screenplay, drawing protests from the Iranian government.

'Witty and ingenious'

Trade magazine The Hollywood Reporter called the prize for Panahi "a victory both for cinema and artistic freedom".

"Taxi" was an early hit among audiences at the 11-day festival, the first major cinema showcase of the year in Europe. 

In it, Panahi himself offers his impressions of contemporary Tehran from behind the wheel of a yellow cab.

A mounted dashboard camera allowed him to film, at first, away from the prying eyes of the Islamic state's authorities.

Each person he offers a lift – including members of his own family – has a story to tell, an axe to grind or an issue to debate about life in today's Iran.

Panahi proves a genial master of ceremonies, treating his sometimes hysterical passengers with unfailing politeness and good humour.

The film builds to a chilling climax in which the extent and limits of the director's liberties are revealed.

Film industry bible Variety called "Taxi" a "terrific road movie" that offered "a provocative discussion of Iranian social mores and the art of cinematic storytelling".

The daily Süddeutsche Zeitung said the Golden Bear for "Taxi" was well-deserved not simply for its political message but also on its artistic merits, calling Panahi's film "witty and ingenious".

"Giving him prizes is a way for the West to disapprove of the politically motivated capricious treatment of the filmmaker by the mullah regime," it said.

"He has shown how, using the simplest means, as a smart and funny observer of your surroundings, you can make a moving film."