The British embassy in Iran reopened on Sunday, nearly four years after it was closed. Iran's embassy in London also opened simultaneously.
British Foreign Secretary Philip Hammond arrived in Tehran on Sunday for the reopening of the embassy that was closed in 2011 after it was stormed by protestors during a demonstration against sanctions against Iran.
Hammond's visit comes weeks after Iran reached a deal with P5+1 group of world powers aimed at curbing its nuclear programme.
European officials have been quick to visit Tehran since July 14, when Iran struck a deal with the US, Russia, Britain, France and China plus Germany ending a 13-year stand-off over its nuclear programme.
The accord will see the lifting of economic sanctions imposed on Iran and has sparked a flurry of interest from countries seeking to re-connect with the oil-rich western Asian nation.
Hammond's visit was the first by a British foreign secretary since 2003.
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Reopening the embassies was "a first step" toward re-establishing the links between the British people and Iranian people, Hammond said.
He said that there has been a "step-by-step" improvement in relations between the two countries since President Hassan Rouhani was elected in July 2013.
"Iran is and will remain a very important country in a strategically but volatile region," he said.
Following the 2011 embassy attack, Britain said it could not have happened without the tacit consent of the Iranian regime at the time.
It erupted after the Iranian parliament voted to expel the British ambassador and reduce trade relations with Britain in retaliation for British-led sanctions against Iran's banking sector.
Students rampaged for hours through Britain's diplomatic compounds in Tehran, tearing down the British flag, ripping up pictures of Queen Elizabeth II and trashing offices. Staff were seized by protestors.
Diplomatic relations were reduced to their lowest possible level, with Britain expelling Iran's officials.
Iranian Foreign Minister Mohmmad Javad Zarif said Iran and Britain could resolve "differences through interaction and reaching a mutual understanding".
He noted that Tehran and London share views about fighting "extremism, Islamic State" and drug trafficking in the region.
He said the reopening of the embassies could be a restart of Iran-Britain relations, adding, "Today (Sunday), we entered the phase of mutual relationship based on mutual respect".