Diplomats in London said that only the Iranian embassy's consular section, which handles visas and commercial affairs, resumed operations yesterday, while its political section remained closed.
Nonetheless, Britain said the move represented another welcome sign of progress.
"This is the next stage of the step-by-step process of taking forward our bilateral relationship with Iran," Britain's Foreign Office said in a statement.
Iran made its London move as part of an agreement with Britain, announced yesterday on the sideline of wider negotiations in Vienna between Iran and six world powers, to end both countries' reliance on formal "protecting power" arrangements.
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"We will no longer have protecting powers acting as intermediaries. Diplomatic contact will now be made direct between our two countries," the Foreign Office said.
It emphasised that British and Iranian officials would talk directly to each other "through non-resident charges d'affaires and officials."
A charge d'affaires is typically the second-highest diplomatic official below the ambassador.
As part of their agreement, Britain removed the Swedish flag and an accompanying Swedish "British interests" sign from the British embassy building in Tehran. In its place a British embassy plaque and an "Embassy closed" sign were erected.
Earlier yesterday, media reports billed the Iranian embassy in London as fully reopened.
However, despite the presence of a newly hoisted red, white and green flag outside Iran's west London embassy building, and the apparent presence of Iranian staffers inside, the formal reopening of both countries' political sections, and return of ambassadors, awaits further negotiations.
The British Embassy in Tehran was closed in late 2011 after hard-liners overran the building. Iran's embassy in London also was closed.