"The directory of immigration has today confirmed that Mr. Fischer's application has been approved. The Icelandic embassy in Tokyo has been instructed to inform Mr. Fischer about the decision," Iceland's Foreign Ministry said in a statement.

In an interview broadcast on Monday by Icelandic television station Channel 2, Mr. Fischer said he had written to Icelandic Foreign Minister David Oddsson requesting asylum. Reykjavik agreed only to grant a residence permit, though it instructed its embassy in Japan to "help him to get to Iceland if he so wishes."

Mr. Fischer, who became an American hero for wresting the world chess crown from Soviet domination in 1992, has been held by Japanese immigration authorities in Ushiku, north of Tokyo, since July 13.

He is being held after trying to board a flight to the Philippines using an invalid passport. It was revoked by the United States.

The 61-year-old chess master has been wanted by the United States since 1992 for earning more than $3-million in a chess match staged in the former Yugoslavia, in defiance of an international embargo.

That match was a rerun of his 1972 "match of the century" against Soviet grandmaster Boris Spassky, a series that was held in Reykjavik.

It remains unclear whether Japanese authorities, who rejected Mr. Fischer's request for political asylum, will release him or deport him to the United States, where he could face up to 10 years in prison. But the Icelandic Chess Association, which lobbied for his release, hailed the government's decision.

"This is a great victory, a victory for Bobby and for Iceland," Gudfridur Lilja Gretarsdottir, president of the association, told Icelandic public television.

"We are helping an old friend in need, and we are proud that the government had the courage to do that. Playing chess has never been a crime."

Neither Mr. Spassky, now a French citizen, nor the German referee of the Yugoslav game has been prosecuted in his home country for violating the international embargo. Mr. Spassky wrote in an open letter that he would gladly join Mr. Fischer in a U.S. prison cell if Mr. Fischer is sentenced.

"Just let us play chess," he added.