The incident took place at approximately 10:30 Iraqi time, a statement said.
The British personnel were engaged in routine boarding operations of merchant shipping in Iraqi territorial waters in support of United Nations Security Council Resolution 1723 and the government of Iraq.
Operating from HMS Cornwall, the UK boarding party had completed a successful inspection of a merchant ship when they and their two boats were surrounded and escorted by Iranian vessels into Iranian territorial waters, the statement added.
Foreign Secretary Margaret Beckett has ordered that the Iranian ambassador in London be summoned to the Foreign Office.
We are urgently pursuing this matter with the Iranian authorities at the highest level.
The British Government is demanding the immediate and safe return of our people and equipment, the statement said.
In June 2004, Irans Islamic Revolutionary Guards Corps (IRGC) seized six British marines and two sailors along with their gunboats, claiming that they had strayed into Iranian waters. They were held in Iranian custody for three days.
The 8 Britons were blind-folded and paraded on television.
Then-British Defence Secretary Geoff Hoon later told the House of Commons that the released sailors accounts showed that they had been abducted by the Revolutionary Guards while they were still in Iraqi waters. The sailors also revealed that while in captivity, they had been forced into a shallow ditch, blindfolded, and led to believe that they would be shot dead.
The British Foreign Office however dismissed such claims and then-Foreign Secretary Jack Straw warmly thanked his Iranian counterpart Kamal Kharrazi after the servicemens release, and said the sailors had been well-treated, even though they had been paraded in front of television cameras in clear violation of the Geneva Conventions.
Despite repeated demands by London, Tehran never returned the three Royal Navy gunboats. In 2005, they were put on display in a town near where they had been seized.
Analysts say that such actions by Irans military against British troops are part of efforts to blackmail Whitehall into ending its support for resolutions against Irans suspected nuclear weapons program at the UN Security Council and the International Atomic Energy Agency (IAEA).
The British embassy in Tehran has also been the site of frequent attacks by Islamic radicals loyal to Irans Supreme Leader Ayatollah Ali Khamenei.
