We report the results of model calculations for the photodissociation of iodine molecules inside liquid helium clusters composed of several thousand atoms. The helium clusters are described by a quantum effective potential between helium atoms. Classical trajectories are run with this potential model in order to determine excitation energy thresholds for caging of atomic iodine fragments followed by recombination or, alternatively, production of photofragments which leave the helium cluster. Typical photofragments are iodine atoms carrying along a certain number of helium atoms. The computed photofragment velocity and size distributions for several cluster sizes compare favourably with experimental observations for related molecular systems.