The shocking article in the Inspire magazine read 'Wanted: Dead or alive for crimes against Islam.
A fatwa was issued against Rushdie by Iran's late leader Ayotollah Khomeini in 1989 over passages in his book The Satanic Verses.
Iran's Khordad Foundation has raised the reward offered for his killing by 500,000 pounds to 2.5million pounds.
Alongside the images is the slogan: "Yes we can. A bullet a day keeps the infidel away.
The banned extremist web magazine is published by the Middle East Media Research Institute based in Washington DC.