Budapest  - Three kilos of heroin were found hidden in a cemetery near Hungary's Austrian border in the grave of a suspected drug dealer's grandmother, local police said on Friday.

The discovery followed the arrest in the Austrian town of Graz on Tuesday of two Hungarian men as they attempted to sell 100 grams of the drug.

The Austrian police alerted their Hungarian colleagues, who used sniffer dogs in a search of the suspects' homes in the Hungarian border town of Sopron. They found nothing.

However, Austrian police subsequently arrested a third man, allegedly the leader of the drug ring, who revealed the whereabouts of the macabre cache, which has a street value of around 250,000 dollars.

The heroin, in several dozen plastic bags, was hidden in two graves in a cemetery in Sopron, one belonging to the alleged ringleader's own grandmother.

Local police captain Gabor Farkas told reporters that the heroin was being tested to see if the batch was linked to the death of two heroin addicts in Sopron in the past month. (dpa)