The attack follows Iran's expulsion of the UK's ambassador Dominick Chilcott Around 20 Iranian protesters on Tuesday stormed the British embassy in Tehran, removing the mission's flag and ransacking offices, an AFP journalist outside the compound reported. The protesters were also shown live on Iranian state television throwing stones at embassy windows, breaking them, and one was seen climbing the wall with a looted portrait of Britain's Queen Elizabeth II.
The Union flag was torn down and replaced with the Iran flag, windows were smashed with documents being thrown from them, and petrol bombs were reported to be thrown in the compound.
The Muslim Students Followers of the Supreme Leader, who claimed responsibility for organising the attack on the embassy, issued a statement reportedly written in blood.
"Our people are not prepared to be humiliated any more under any circumstances and prefer a red death to a condemned life of misery. We are ready to be killed for our aims," it said.
They also referred to the embassy as "another nest of spies that must be shown our wrath and hatred towards it" and said  the date of the action was deliberately chosen to coincide with the fist anniversary of the assassination of Majid Shahriari, the nuclear scientist killed last year in a bomb attack.
The intrusion occurred as ranks of Iranian police in riot gear stood by, initially  doing nothing.
Outside the embassy's walls, several hundred other demonstrators were gathered, some of them chanting "Death to Britain" and demanding the British ambassador leave the country immediately.
Iran's semi-official Mehr news agency said embassy documents had been set alight. Embassy staff fled by the back door, the agency added.
Pictures showed a car inside the compound on fire while outside the embassy's walls, several hundred other demonstrators were gathered.
Live TV footage showed Iranian riot police gradually clearing the protesters away from outside the embassy.
An unconfirmed report from the official Irna news agency said a separate group of protesters broke into another British embassy compound in the north of the city and seized "classified documents".
The demonstration came a day after Iran passed a law to expel the ambassador within the next two weeks in retaliation for new British sanctions that cut off all ties with Iran's financial sector.
The UK's Foreign Office said it was "outraged" by the actions. It urged Iran to honour international commitments to protectdiplomaticmissions and their staff.
"The Iranian government have a clear duty to protect diplomats and embassies in their country and we expect them to act urgently to bring the situation under control and ensure the safety of our staff and security of our property," said the statement.  It was not clear how many embassy staff were in the building at the time. A Foreign Office source said it was checking on the well-being of workers and diplomats, AP reported.
Britain had threatened to act "robustly" if Iran's foreign ministry follows through by kicking out its ambassador, Dominick Chilcott, who took up his post only last month.