Britain is expected on Tuesday to announce steps to strengthen relations with Iran that could lead to the re-opening of the British embassy in Tehran, the BBC reported.
As the West seeks to court Iran in an attempt to battle militants in Iraq, Foreign Secretary William Hague is due to give a statement on Iran at 1030 GMT on Tuesday.
The BBC reported that Hague's plan would lead to the re-opening of the British mission in Tehran although this would not happen immediately.
Britain closed its embassy in Tehran in late 2011 after an mob ransacked the mission but revived diplomatic relations with Iran last November, appointing a non-resident charge d'affairs.
The United States, a close ally of Britain, has said it could launch air strikes and act jointly with its arch-enemy Iran to shore up the Iraqi government after a rampage by Sunni Islamist insurgents across Iraq that has scrambled alliances in the Middle East.
Hague has ruled out any military involvement in Iraq by Britain but said a British "operational liaison and reconnaissance team" arrived in Baghdad at the weekend and he has said that Britain will provide humanitarian assistance as needed.