Thousands of Iranians took to the streets in the early hours of Wednesday, chanting anti-government slogans in so far peaceful protests after police surrounded a Tehran student dormitory, witnesses said. "Political prisoners must be freed," some 3,000 people shouted in a square near Teheran University, the scene almost four years ago of the biggest pro-reform unrest since the 1979 revolution -- which was also led from the same campus. Other chants were directed against Iran's clerical rulers, a most unusual development. Residents said the chants were the most extreme since the unrest four years ago. Many people said they had gathered after hearing calls by U.S.-based Iranian exile satellite television channels to go to the campus after student protests there on Tuesday. But hundreds of police blocked their way and stood guard around dormitories where Tuesday's student protests took place. The witnesses said some protesters lit fires in the streets but police had not intervened. Many in Iran have lost faith in moderate President Mohammad Khatami and his lack of progress in reforming the 24-year-old Islamic Republic in the face of strong conservative opposition from the holders of powerful positions within the state. High unemployment and frustration with Iran's strict Islamic laws have fed discontent among the overwhelmingly youthful population, around 70 percent of which is under 30 and has little memory of life before the revolution. Analysts say the reformers have been further weakened by a resurgent hardline faction which is determined not to loosen its grip on power now that U.S. troops are on both the eastern and western borders of Iran, in Afghanistan and Iraq. Despite the reformers' overwhelming victories in presidential and parliamentary polls since Khatami came to office in 1997, most of their efforts to institute change have been blocked by conservatives appointed as political watchdogs. Late last year Iran saw its biggest pro-reform protests for three years after academic dissident Hashem Aghajari was sentenced to death for blasphemy. The conviction was later overturned. The initial court verdict in November sparked almost two months of protests as thousands of students boycotted classes and staged rallies, insisting Aghajari's trial and sentencing highlighted political repression and a lack of free speech. The largely peaceful protests turned violent at times. Hundreds were arrested by baton-wielding police, and Islamic vigilantes attacked rallies. Dozens of pro-reform intellectuals, journalists and student leaders have been jailed as part of a conservative crackdown that followed the student protests in 1999. **PHOTO CAPTION*** Iranian President Mohammad Khatami at a Shi'ite shrine in Damascus, in this picture taken May 14, 2003. REUTERS/Khaled al-Hariri