ABU DHABI (Reuters) - Bahrain has released on bail a leading human rights activist who was arrested during a protest rally last month, Amnesty International said, as the Gulf Arab kingdom faces international criticism of its rights record.

Sayed Yousif al-Muhafda, from the Bahrain Centre for Human Rights, was arrested at a demonstration in December.

Unauthorised rallies and gatherings are banned in Bahrain, which hosts the U.S. Navy's Fifth Fleet and which has been in turmoil since pro-democracy protests led by its Shi'ite Muslim majority erupted last year.

His lawyer said at the time that Muhafda was there to observe the march in Manama, adding that he was already being investigated on charges of spreading false news on Twitter.

Amnesty, in a statement late on Thursday, said a court had released Muhafda on a bail of 100 Bahraini dinar ($270). His next hearing was scheduled for January 29.

Bahrain's ruling Al-Khalifa family, who are Sunni Muslims, used martial law and help from Gulf neighbours to put down last year's uprising, but unrest has resumed.

The opposition says little progress has been made towards its demand for reform, including a parliament with full powers to legislate and form governments. Many Shi'ites complain of political and economic marginalisation, a charge Bahrain denies.

Bahrain has stepped up efforts to end the unrest in recent months and several activists have been arrested or jailed for organising or taking part in unlicensed protests.

Earlier this month, a decision by an appeals court to uphold prison terms for 13 protest leaders drew international condemnation. Watchdog groups said the ruling showed Bahrain's judicial system was flawed and unable to protect basic rights.

Among those who spoke out was U.N. Secretary-General Ban Ki-moon, who said he deeply regretted the move and described the sentences as harsh.

(Reporting By Raissa Kasolowsky; Editing by Janet Lawrence)

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