Gillian Gibbons, a 54-year-old teacher at the Unity High School in Khartoum, was arrested on Sunday after complaints from parents.

"She has been transferred for questioning," said one police official in the station where she was being held.

The official said a decision was possible on Tuesday from the investigating authorities as to whether charges would be brought against Gibbons.

If convicted of insulting Islam, she could be sentenced to 40 lashes, six months in prison or a fine, lawyers said.

Teachers at the school said Gibbons had asked her class of 7-year-olds to choose their favourite name for the teddy bear and 20 of the 23 had voted for Mohammad.

Unity director Robert Boulos had said the school would be closed until January because he was afraid of reprisals in mainly Muslim Khartoum.

In 2005 a Sudanese paper was closed for three months and its editor arrested for reprinting articles questioning the roots of the Prophet Mohammad, a move which prompted angry protests.

Al-Wifaq editor Mohamed Taha was later abducted from his home by armed men and beheaded.

A British embassy official said Gibbons was in good spirits and school officials said they were optimistic she would be released.

Sudan's justice minister declined to immediately comment.