Britain's first ranking ambassador since the revolution that swept the clerics to power will be Nicholas Browne - who was charge d'affaires for just five weeks in early 1989 before Teheran broke off diplomatic relations in the storm over the Salman Rushdie death sentence. His Iranian opposite number in London will be Gholamreza Ansari.
Ties between the two countries were restored in October 1990, but only at charge level. However, the climate improved sharply after the reformist President Mohammad Khatami gained the upper hand in his struggle with Iran's conservative clerical leaders.
The exchange of ambassadors was agreed last autumn by Robin Cook, the Foreign Secretary, and his Iranian opposite number, Kamal Kharrazi. Last night Mr Cook said the move would help to restore a "healthy and mutually beneficial friendship" and enable Britain to work with Iran as it opens up to the outside world.
This new Iranian policy is now strikingly apparent as President Khatami visits Iran's traditional regional rival, Saudi Arabia - the first trip to the country by an Iranian leader since 1979 and part of a concerted effort by Teheran to improve relations with its Arab neighbours.
The death edict imposed by a religious group upon Mr Rushdie for The Satanic Verses still stands and the bounty on his head was recently increased to $2.8m (pounds 1.75m), but the Iranian government has met a key British demand by disowning the fatwa.
A refusal to re-establish full ties would have damaged British interests. European Union ambassadors were withdrawn in 1997 amid claims that Iran was behind the murder of two Kurdish dissidents in Germany. But they have returned to Iran, and to the economic and political benefits of one of the Middle East's main markets.
Officials say that a similar process could soon be underway with Libya. Britain severed relations after WPC Yvonne Fletcher was killed by gunfire from the Libyan embassy (or `People's Bureau' as it was then known) while she policed a demonstration in St James's Square in 1984.
The climate improved earlier this year after Libya handed over the two suspects in the Pan Am Lockerbie bombing.
The Fletcher case is an obstacle, but diplomats say Libya could soon meet British demands for co-operation, and for compensation for her family.Reuse content