Nazanin Zaghari-Ratcliffe is being used as a political pawn and the UK must not process any Iranian funds until she is released, a Nobel laureate has said.
Monday marks the British-Iranian charity worker's 800th day in jail having been accused of spying.
It also marks her four-year-old daughter Gabriella's fourth birthday and 800 days since she was separated from her parents.
Ms Zaghari-Ratcliffe hoped she would be granted temporary release from prison, where she is serving a five-year prison sentence, to celebrate the birthday, but the application was refused.
She is facing a further hearing accused of an unspecified security charge and her husband, Richard Ratcliffe, believes she will be accused of spreading propaganda against Tehran's Islamist regime.
Shirin Ebadi, an Iranian human rights lawyer, former judge and human rights activist, who won the Nobel Peace Prize in 2003 for her efforts to promote democracy and human rights, called for the mother-of-one to be released.
She said: "Yes, Nazanin Zaghari-Ratcliffe is being used as a political pawn but it is not just her.
"There are currently over 30 dual nationals that are being held in Iran, so pressure must be put on the Iranian government in that regard.
"Any trade agreements must be conditional on the release of these dual nationals."
Dr Ebadi, who sits on the selection committee for the Aurora Prize for Awakening Humanity, which was awarded on Sunday to Rohingya activist Kyaw Hla Aung, was speaking at the event in Armenia.
She added: "In the first place the UK should downgrade its political relations with Iran until they free not only Zaghari-Ratcliffe but other dual-Iranian nationals held in prison.
"The British Government must not allow its banks and companies to sign any deals or process any Iranian funds until they are released."
Mrs Zaghari-Ratcliffe, from Hampstead, north London, was arrested and jailed in 2016.
She has consistently denied all allegations, insisting she was on holiday to introduce her daughter to her family.
The Free Nazanin Campaign has arranged an event outside the Foreign Office on Monday night to mark Gabriella's fourth birthday, where 800 candles will be lit - one for each day she has been separated from her parents.
There will also be readings from family members and Labour MP Tulip Siddiq, and a cake with happy birthday sang to Gabriella over Skype.
Mrs Zaghari-Ratcliffe was allowed to celebrate her daughter's birthday with Gabriella in prison after an application for temporary release was refused.
She said: "I thought that there would be a sense of humanity. But it was too good to be true. Not even for my daughter's birthday."
"I remember this day four years ago - that summer eating watermelon with her in our arms, and the first baby baths, feeling we had the most gorgeous child.
"Will we ever experience that again? It was all too good to be mine.
"Sometimes I think I didn't deserve motherhood - I wouldn't have been here otherwise."
Her husband added: "Birthday candles mark the celebration of another year, another milestone reached.
"My fourth candle is partly a reluctant one - but today we emphasise the lighting of candles rather than there is no one to blow them out.
"I am proud that Gabriella is growing up with spirit and warmth. And I am glad her grandparents have held her when we were not there, throughout this ordeal.
"Today is a chance to remind Gabriella even at this distance - she is the light of our world, and the world can be a bright place."