Britain's embassy in Iran has reopened in a sign of the diplomatic thaw between the two nations four years after the building was shut when it was stormed by violent protesters.
Philip Hammond is in Tehran for a ceremony to mark the event in the first visit to the country by a British foreign secretary since 2003.
The UK has had no diplomatic presence in Tehran since a mob ransacked the British embassy in 2011 but the election of Hassan Rouhani as president brought about a significant improvement in relations.
Initially, the embassy will be headed by a charge d'affaires, Ajay Sharma, but Mr Hammond said an agreement on upgrading to full ambassador status is expected to be reached in the coming months. Iran's embassy in London is also reopening.
In a ceremony at the embassy attended by diplomats and representatives of the Iranian ministry of foreign affairs, the Foreign Secretary raised the Union Flag.
Plans to reopen the embassy were announced by the Government last year as relations between London and Tehran improved under Mr Rouhani and Iran's strategic position came under the international spotlight as the crisis sparked by Islamic State, also known as Isil, grew in neighbouring Iraq.
Last month Iran struck a deal after a decade of negotiations with world powers over its nuclear programme, with some sanctions being lifted in return for allowing inspections.
The Foreign Office later eased its advice against travelling to Iran, saying the risk faced by British nationals had changed in parts of the country.
Mr Hammond and Treasury minister Damian Hinds have travelled to Tehran with a small trade delegation, including representatives from the Institute of Directors, British Bankers' Association, Amec Foster Wheeler, Shell Upstream International, Confederation of British Industry, the Weir Group and Benoy, to discuss opportunities following the historic nuclear agreement.
The Foreign Secretary said: "Four years on from an attack on the British Embassy, I am today reopening it. The Iranians will simultaneously reopen their embassy in London. Our relationship has improved since 2011. President Rouhani's election and last month's nuclear agreement were important milestones. I believe that we have the potential to go much further.
"Reopening our embassies is a key step to improved bilateral relations. In the first instance, we will want to ensure that the nuclear agreement is a success, including by encouraging trade and investment once sanctions are lifted. Britain and Iran should also be ready to discuss the challenges we both face including terrorism, regional stability, the spread of Isil in Syria and Iraq, counter-narcotics and migration.
"This move does not mean that we agree on everything. But it is right that Britain and Iran should have a presence in each other's countries. The role of embassies is to build co-operation where we agree and to reduce our differences where we don't.
"Initially, the embassy will be led by a charge d'affaires with a small staff offering a limited range of consular services. Over the months ahead we expect to agree with the Iranians an upgrading of our respective mission leaders to full ambassador status and to be able to offer a full range of services."