William Hague has said the "circumstances are right" to reopen the UK embassy in Iran as the West looks to improve relations to help tackle the crisis in Iraq.
The UK closed its Tehran embassy after it was ransacked by a mob in 2011 and diplomatic relations soured.
However, following the election of Hassan Rouhani last year, relations between the West and Iran have shown some signs of improvement.
In October, the Foreign Secretary announced the appointment by both countries of non-resident charge d'affaires to work towards reopening the embassies.
Mr Hague's statement comes as the US prepares to open talks with Iran and US Secretary of State John Kerry suggested he would be open to military cooperation on Iraq.
The president announced last night that around 275 US military personnel could deploy to Iraq to provide support and security for the US embassy and its staff in Baghdad.
Mr Rouhani said at the weekend he would be willing to work with the West to tackle the bloody insurgency in Iraq and help stem the flood of terrorism across the Middle East region.
Senior officers from the Revolutionary Guard are already in Baghdad where they are offering assistance to leaders.
Shia-dominated Iran, which supports Syria's president Bashar al Assad, does not want Sunni militants to establish a stranglehold on the doorstep.
Mr Hague made his announcement on Iran in a written statement later after speaking to his counterpart in Iran.
He appeared in the Commons on Monday to give an update on the situation in Iraq and was asked by shadow foreign secretary Douglas Alexander about the "urgent case for ensuring an effective British diplomatic presence in Tehran".
Mr Hague said he had discussed matters with Iranian counterpart Mohammad Javad Zarif.
"He said that there was a case for a further step forward in our bilateral relations. I have discussed that with him, and I shall have something more to say about our discussions imminently," said Mr Hague.
"However, our work on that is distinct from discussions on Iraq, which is partly why I shall address those separately."
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