China announced in August last year that candidates running for the city's chief executive in 2017 - the first ever public vote for leader - would be vetted by a pro-Beijing committee.
That decision sparked more than two months of mass pro-democracy rallies which brought parts of Hong Kong to a standstill.
A House of Commons Foreign Affairs Committee report released late yesterday said the electoral proposals did not offer a "genuine choice" to the people of Hong Kong.
"It's the first honourable thing that the British have done in this Hong Kong fight for democracy," said Alan Leong of Hong Kong's Civic Party.
More From This Section
Lawmaker Albert Ho of the Democratic Party also welcomed the report.
"I can't agree more with what they have said, they have certainly spoken out the truth," pro-democracy legislator Albert Ho told AFP.
British MPs from the committee were barred from entering Hong Kong by China in December to research the report, with Chinese officials accusing them of acting like a colonial power.
The UK government has been criticised by some campaigners for failing to heed fears over increased Chinese influence on the city.
British Foreign Secretary Philip Hammond said that there was still an opportunity for "a meaningful step forward for democracy", despite Beijing's restrictions, in a bi-annual report on the former colony published last week.
Civic Party legislator Claudia Mo said that she hoped the new Foreign Affairs Committee report would now "exert some pressure on the existing British administration on the Hong Kong question".
"We in Hong Kong cannot count on and depend on any foreign powers, British included, to help us to get what we want in terms of real democracy," Leong said.