TEHRAN, Iran (AP) _ In the office of the Islamic Students Association, a blood-stained shirt hangs on the wall with yellowing copies of the group's now-defunct newspaper.

It's a reminder of the day when a dozen thugs burst in and beat association president Heshmatollah Tabarzadi with a heavy cable. He had criticized Iran's religious leaders in the student newspaper, and the thugs were the reply from hard-liners in the government.

For years, that was the price of speaking out in Iran. But much has changed since Tabarzadi _ who has recovered from his wounds _ was beaten last year.

In August, President Mohammad Khatami, a moderate cleric, took office and began remaking the political scene. So far, his greatest achievement has been to lift restrictions on the press, cinema and the arts, breathing new life into Iran's cultural life.

Newspapers accustomed to never criticizing the mullahs or their religious government are now enjoying freedoms unknown since the early days of the 1979 revolution that ousted the U.S.-supported shah.

Last month, when 4,000 demonstrators clashed with riot police in Tehran over the arrest of Mayor Gholamhossein Karbaschi on embezzlement charges, most newspapers ran detailed front-page accounts and pictures.

Before Khatami, the average Iranian would have gotten the full story only by word of mouth or from Farsi-language radio broadcasts from abroad.

``In the mayor's affair, there was nothing in the foreign media that wasn't in the local papers,'' noted Hossein Nosrat, head of the foreign press department in the Ministry of Culture and Islamic Guidance. ``There was a time when the opposite was true.''

One newspaper testing the limits of the new freedoms is Jameah, an afternoon daily started in December that sells out within hours of hitting newsstands.

The newspaper, whose name means ``society,'' broke a taboo by publishing interviews with Ibrahim Yazdi, head of the outlawed Freedom Movement, and with Abbas Amir Entezam, a former government spokesman convicted of spying for the United States.

After the mayor's release from jail, Jameah poked fun at the religious hard-liners behind the arrest by noting the mayor and three journalists arrested for political offenses all had become public heroes.

``Get arrested and become an instant hero,'' the paper said.

Jameah's editor, Mahmoud Shams, sees his paper as a watchdog.

``Mr. Khatami must fulfill the promises he made during his campaign to strengthen civil society, and there must be a paper that watches to guarantee these promises are fulfilled,'' he said in an interview.

The weekly newspaper Fakhur learned, however, that there are limits.

In February, it was banned for six months for running pictures of the women involved in the President Clinton investigation. It showed them without the required head-to-foot Islamic dress.

Still, the hard-liners, already on the defensive since their election loss to Khatami last May revealed their unpopularity, have had to watch a stream of cultural liberalization.

For instance, the first official act of the new culture minister, Ataollah Mohajerani, was to allow the showing of a movie that had been banned for more than two years: ``Snowman,'' the story of an Iranian man who dresses as a woman to marry an American and go to the United States. It became an instant hit.

Other forms of art are also experiencing a revival.

Six years ago, Sassan Nassiri and four fellow artists took over an apartment building about to be torn down and transformed one floor into a work of art, with murals on the walls and mobiles hanging from ceilings.

Officials rejected a permit for their show. When they opened it anyway, supporters of the hard-liners stormed the exhibition and closed it down.

Last month the five artists took over another condemned building for a similar show, this time not asking for a permit. But an official from the culture ministry heard about the show and gave them a permit anyway.

Despite the new freedoms, opposition groups such as Yazdi's Freedom Movement and the student association headed by Tabarzadi still are banned from publishing.

``Mr. Khatami's powers are very limited,'' Yazdi said. ``He controls the Ministry of Culture and Islamic Guidance, but the Interior Ministry, which decides on the activities of political groups, is still in the hands of his rival faction.''