The standoff in the icy waters off the Antarctic has forced the government in Australia to contact Tokyo to try to secure their release.

But Paul Watson, head of the Sea Shepherd Conservation Society, accused Japan of using "terrorist" tactics by holding the two men hostage and making demands in return for their freedom.

"I got a letter from (Japan's) Institute of Cetacean Research saying they'll release the hostages if we agree to not interfere with their whaling operations," he told AFP.

"Now when you start making demands for the return of hostages that sounds like terrorism to me," he said from on board the Steve Irwin ship, which is chasing the Japanese whaling fleet.

Asked whether he would agree to the demands, Watson replied "absolutely not," adding that he wanted the two men returned "unconditionally".

The activists, Australian Benjamin Potts and Briton Giles Lane, boarded the Japanese harpoon vessel Yushin Maru No 2 on Tuesday to deliver a written demand that Japan stop killing whales.

Sea Shepherd said the men were assaulted and tied to the ship's radar mast, but Japan denied this, saying they were held in an office aboard the ship after boarding illegally.

Australian Foreign Minister Stephen Smith said Wednesday that Japan had agreed to release the men after being contacted by Australian officials.

"Late last night I was advised the Japanese had agreed to this and they had instructed the relevant whaling ship to return the men to the Steve Irwin," Smith told national radio.

"The most important thing here is the safety and welfare of the two men concerned and we do, as the Australian government, want their immediate release."

Smith refused to be drawn on whether he considered the two men had been held hostage but said Australian Federal Police were investigating the incident.

A spokesman for Japan's Institute for Cetacean Research said the protest ship was deliberately avoiding phone calls and emails attempting to arrange the return of the activists.

"I believe that they want to continue this for as long as possible," its spokesman Glenn Inwood told Sky News, referring to the media coverage of the incident.

He denied the two men had been mistreated, saying they had been given hot meals, a bath and had a good night's sleep.

"They were restrained for a short period (on deck) before being taken to an office," Inwood said. "It was the only way, you couldn't have them running around the deck not knowing what they're going to do."

The institute's director general, Minoru Morimoto, said the men had boarded the Yushin Maru No. 2 after they made attempts to entangle the ship's propeller with ropes and threw bottles of acid onto the decks.

The men were detained because "it is illegal to board another country's vessels on the high seas," he said.

The Japanese fleet, on a mission to kill around 1,000 whales in Antarctic waters this season, is being harassed by shipborne activists from Greenpeace as well as Sea Shepherd.

Japan exploits a loophole in a 1986 international moratorium on commercial whaling to kill the animals for what it calls scientific research, although it admits the meat from the hunt ends up on dinner plates.

Australia is a strong opponent of whaling, and its Federal Court on Tuesday ordered Japan to stop hunting and killing whales anywhere around its coastline or off Australian Antarctic territory.

However, the court noted that unless the Japanese whalers entered Australian jurisdiction where they could be seized, there was no practical way the order could be enforced.

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