An anti-child abuse watchdog has reversed its decision to blacklist a Wikipedia page showing a controversial 1976 album cover after protests over censorship.

Most British internet service providers had blocked users from accessing the image of a prepubescent naked girl on the cover of the Virgin Killer album by the Scorpions, a German band, after the Internet Watch Foundation ruled it was a "potentially illegal indecent image".

But the picture was accessible on many other sites and some argued that, while provocative, it was an artistic historical artefact and should not be banned.

Last night the IWF accepted that its ban had been counter-productive after the controversy had prompted millions to view the image.

It said in a statement: "The IWF Board has considered these findings and the contextual issues involved in this specific case and, in light of the length of time the image has existed and its wide availability, the decision has been taken to remove this webpage from our list.

"IWF's overriding objective is to minimise the availability of indecent images of children on the internet, however, on this occasion our efforts have had the opposite effect. We regret the unintended consequences for Wikipedia and its users. Wikipedia have been informed of the outcome of this procedure and IWF Board's subsequent decision."

The IWF said that any further reported instances of the image which are hosted by ISPs outside Britain would not be blacklisted. But it reserved the right to reconsider other instances of the image hosted in the UK.

Wikipedia had sharply criticised the IWF decision which had the side-effect of leaving many British internet users unable to edit Wikipedia entries and affected the website's performance.

The IWF is funded by the European Union and the British online industry to gather reports of instances of child abuse pictures on the internet and issue 'take down alerts' to ISPs. Its blacklist is used on a voluntary basis by 95 per cent of British-based residential ISPs.

In its statement the IWF said that it still considered that the image was "potentially in breach of the Protection of Children Act 1978" in the UK. The image shows a naked girl, aged about 10, with a cracked glass effect covering her genitals.

The album cover, which was replaced in many countries after an outcry when it was released in 1976, has been under discussion on Wikipedia for many months and has been deleted and reinstated. The page was reported through the IWF's online reporting mechanism on 4 December and assessed to be potentially illegal and indecent.

The IWF said: "As such, in accordance with IWF procedures, the specific webpage was added to the IWF list. This list is provided to ISPs and other companies in the online sector to help protect their customers from inadvertent exposure to potentially illegal indecent images of children. Following representations from Wikipedia, IWF invoked its Appeals Procedure and has given careful consideration to the issues involved in this case. The procedure is now complete and has confirmed that the image in question is potentially in breach of the Protection of Children Act 1978."

The Wikimedia Foundation behind Wikipedia had protested that the IWF had gone too far. "The IWF didn't just block the image; it blocked access to the article itself, which discusses the image in a neutral, encyclopedic fashion," said Wikimedia Foundation head Sue Gardner from San Francisco.

"The IWF says its goal is to protect UK citizens, but I can't see how this action helps to achieve that - and meanwhile, it deprives UK internet users of the ability to access information which should be freely available to everyone. I urge the IWF to remove Wikipedia from its blacklist," she added.