Britain is to reopen its embassy in Tehran, four years after it closed.
Foreign Secretary Philip Hammond will visit Iran at the weekend with a delegation of business leaders, a senior government source said.
The embassy was closed in 2011 after it was stormed by Iranian protesters during a demonstration against sanctions imposed by Britain.
The visit comes weeks after Tehran reached a deal with six world powers aimed at curbing its nuclear programme.
After the closure of the British embassy in Tehran and the Iranian embassy in London in 2011, diplomatic relations were left at "the lowest possible level", BBC diplomatic correspondent Jonathan Marcus said.
Since then "ties have slowly been warming", our correspondent said, but he added that last month's nuclear deal had clearly been decisive in prompting the UK embassy to be reopened.
Timeline: UK and Iran relations
Analysis
Jonathan Marcus, BBC diplomatic correspondent
The reopening of Britain's embassy in Tehran will consolidate the normalisation of relations after a very bumpy period.
Britain was deeply aggrieved at the storming and ransacking of its embassy compound in November 2011, clearly feeling that the Iranian authorities should have protected the building.
While relations were not broken off, they were reduced to the lowest level possible. Ties have slowly been warming but it is clearly the successful conclusion of the nuclear accord with Iran that has paved the way for the embassy reopening.
A number of other European countries have already sent ministers and trade delegations hotfoot to Tehran in the wake of the nuclear deal. Britain has to an extent lagged behind.
The hope though is that better diplomatic ties and stronger economic links might help to bolster more reform-minded elements in the Iranian leadership and open up Iranian society to new pressures for change.
In 2013, the UK and Iran both confirmed the appointment of non-resident charges d'affaires to act as heads of diplomatic affairs.
The reopening of the embassy was first publicly proposed by William Hague in June last year, but it has been held up by technical problems.
Iran's reluctance to relax import laws has slowed the replacement of communications and other equipment taken out when the post was abandoned.
The Home Office has also sought assurances over visa regulations amid fears that it would otherwise be unable to deal with Iranians who overstayed their right to be in the UK.
"While any visa service must operate within the framework of Iranian law, it must also meet broader UK immigration objectives," it said.
"A visa service is an important component of normal embassy business, but there are a number of outstanding issues that must be resolved."
The BBC's Kim Ghattas recently spent a week in Iran - the longest period a BBC correspondent has been granted permission to report there since 2009 - andinterviewed the Vice-President Masumeh Ebtekar about the country's thawing relations with the West.
Ms Ebtekar said that Iran wanted to co-operate with neighbouring states to promote peace in the Middle East, and that while Iran had a right to defend itself it had no intention of dominating the region.
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