Foreign Secretary Dominic Raab has said “the regime in Tehran is at a crossroads” as he warned Iran against slipping “further and further into political and economic isolation”.
He urged Iran to “engage in diplomacy and chart a peaceful way forwards”.
It comes as Iran’s ambassador to the UK met officials at the Foreign Office following the detention of his British counterpart in Tehran last week.
Mr Raab said the arrest was “a flagrant violation of international law”.
Responding to an urgent question in Parliament, Mr Raab said the detention of UK diplomat Rob Macaire after a vigil for victims of last week’s plane crash was “without grounds or explanation”.
Middle East Minister Andrew Murrison expressed the UK government’s “strong objections” to the incident, during the meeting with Iranian ambassador Hamid Baeidinejad on Monday afternoon.
The Foreign Office called for an investigation and said the arrest was a breach of the Vienna Convention – an international agreement that governs diplomatic relations between countries.
Mr Macaire was attending an event on Saturday that was advertised as a vigil for the 176 people who died in Wednesday’s crash of an Ukraine International Airlines Boeing 737, shortly before he was arrested.
He was held for three hours when he stopped at a barber shop for a haircut on his way back to the British embassy.
Mr Macaire said he attended the event because it was “normal to want to pay respects”, pointing out that some of the victims were British, but added that he left the vigil when some people started “chanting”.
But Iran’s foreign ministry said Mr Macaire’s presence was “against diplomatic norms”.
The statement, reported by state TV, said: “Any new mistake of Britain will be severely confronted by Iran, and London will be responsible for that”.
“Threatening Iran with fresh sanctions over that will cause tension between Tehran and London.”
No 10 said it was “seeking full assurances” the detention would not happen again.
During the debate in the Commons earlier, Labour MP Barry Sheerman asked the foreign secretary whether he would support sending faith leaders to Iran to speak “at a level of faith” to help ease tensions.
Mr Raab replied: “I sympathise very much with the spirit of the idea of an all-faith diplomatic initiative.
“I think right at the moment he will have seen that we advise, through our Foreign Office, travel advice against travel to Iran and I think for the moment that’s probably the safest bet.”
Five nations whose citizens were on board the airliner will meet in London on Thursday to discuss possible legal action, Ukraine’s foreign minister told the Reuters news agency.
Protests have been taking place on the streets of the Iranian capital, Tehran, to vent anger at officials who initially denied shooting down the plane.