Foreign Secretary Philip Hammond said he would reopen the UK's embassy in Iran on Sunday, four years on since it was trashed by a mob, as Tehran's ties warm with the West.
Iran's embassy in London will reopen at the same time, Hammond said, initially at charge d'affaires level, with a view to installing the two countries' respective ambassadors in the coming months.
European officials have been quick to visit Tehran since July 14, when Iran struck a deal with Britain, China, France, Germany, Russia and the United States, 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 Islamic republic.
Hammond's visit is the first by a British foreign secretary since 2003.
"Four years on from an attack on the British embassy, I am today re-opening it," Hammond said in a statement.
"The Iranians will simultaneously re-open their embassy in London. Our relationship has improved since 2011."
That thaw began with the June 2013 election of Iranian President Hassan Rouhani, a reputed moderate who reached out to the West.
"President Rouhani's election and last month's nuclear agreement were important milestones. I believe that we have the potential to go much further," said Hammond.
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 UK-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 protesters.
Diplomatic relations were reduced to their lowest possible level, with Britain expelling Iran's officials.
"Reopening our embassies is a key step to improved bilateral relations," said Hammond.
"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."
He said London and Tehran should also be ready to discuss challenges including terrorism, regional stability, and the spread of the Islamic State jihadist group in Syria and Iraq.
"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," Hammond added.
Plans to reopen the embassy were announced in June last year.
Initially, the embassy will be headed by a charge d'affaires, Ajay Sharma. He was appointed in a non-resident position in November 2013 and has since visited Iran 12 times.
Hammond and treasury minister Damian Hinds are visiting Tehran with a small trade delegation for the two-day visit starting Sunday.
It includes the Institute of Directors, the British Bankers' Association, Shell Upstream International and the Confederation of British Industry, to discuss future trade opportunities following the historic nuclear agreement.
Hammond is following in the footsteps of his Italian, French and German counterparts who travelled to Iran with business delegations.
Europe is keen on renewing trade ties with Iran and most countries have diplomatic representation in Tehran.
But the United States, which led the nuclear talks, has not had diplomatic relations with Iran since 1979 following the 444-day hostage crisis that followed the storming of its Tehran embassy.