"We expect the Iranian government to reconsider its decision and authorize Parvin Ardalan to leave Iran and come to Stockholm to receive the prize," the head of the Olof Palme Memorial Fund, Pierre Schori, said in a statement.
Schori said the Swedish foreign ministry and the Iranian embassy had been contacted about the matter.
A figurehead of the Iranian women's movement, Ardalan, 36, said Iranian authorities prevented her from leaving Tehran on Sunday when she was ordered off an airplane preparing to take off for Stockholm.
The Olof Palme Memorial Fund announced on February 13 that Ardalan had won the 2007 prize for her women's rights campaign in Iran.
The award is for outstanding achievement named after Palme, a popular Swedish prime minister who was gunned down by a lone attacker in February 1986, shortly after leaving a Stockholm cinema.
Created to promote peace and disarmament and combat racism and xenophobia, the prize consists of a diploma and $75,000 (463,000 kronor).
Ardalan founded a cultural women's centre in the 1990s which in 2005 edited, under her leadership, the first online newsletter on women's rights in Iran, Zanestan.
She was sentenced to three years in prison in April 2007 after being declared a threat to national security for criticizing the state of women's rights in Iran, according to the foundation.
She has appealed the verdict and has yet to serve time in prison.
The ceremony will go ahead as planned on Thursday, Schori said.