IoD director of public affairs David Marshall said: 'We need to get our members' views across to government and Brussels. One of the main vehicles for that is the media.'
The decision to recruit an external agency came as a result of a review by IoD director-general Miles Templeman, the former CEO of pub chain Eldridge Pope who replaced George Cox last October.
Marshall said Templeman had taken the view that there were 'other things we could be doing in terms of our media profile'.
Luther Pendragon's campaign will target the business sections of national newspapers and broadcast news programmes.
The brief is to help the IoD's 55,000 SME director members 'win the arguments' in the media against legislation such as the European Working Time Directive, said Luther Pendragon founding partner Charles Stewart Smith, who leads the account.
The European Parliament last week voted to abolish the opt-out from the directive, a provision used by the UK Government. The media push will also present the IoD's stance on issues such as work/life balance.
Stewart Smith said threats to SMEs from legislation were 'not decreasing'.
As an individual-based membership organisation, the IoD wants to emphasise that it represents 'real people' affected by legislation, in contrast to the CBI, whose members are companies.
Luther Pendragon won the account after a three-way pitch.