"Iran yesterday took the unjustified step of expelling two British diplomats over allegations which are absolutely without foundation," Brown told parliament.
"In response to that action, we informed the Iranian ambassador today that we would expel two Iranian diplomats from their embassy in London," he said.
Brown did not say what allegations had been made against the British diplomats.
Iran's relations with Britain have worsened since disputed June 12 presidential elections, which led to days of protests in which about 17 people have been killed.
Supreme Leader Ayatollah Ali Khamenei has attacked interference by foreign powers, singling out Britain as the "most treacherous" of Iran's enemies.
"I am disappointed that Iran has placed us in this position, but we will continue to seek good relations with Iran and to call for the regime to respect the human rights and democratic freedoms of the Iranian people," Brown said.
Britain has a long history of involvement in Iran and recent relations have been rocky. Britain suspended its diplomatic ties after the Islamic revolution in 1979, only reopening an embassy in 1988, following the Iran-Iraq war.
Relations were downgraded again in the early 1990s, with full normalisation only taking place in 1998.
Earlier on Tuesday, an Iranian parliamentarian said Tehran would temporarily recall its ambassador to Britain.
But a senior Iranian government source did not confirm the report carried by several Iranian news agencies and Britain's Foreign Office said it had not been informed the Iranian ambassador had been recalled.
Iran has stepped up allegations of foreign interference in its internal affairs after official results handed hardline President Mahmoud Ahmadinejad a landslide victory in the June 12 election.
The Iranian parliament's foreign policy commission called on the Foreign Ministry on Monday to reconsider ties with Britain, which Tehran has accused of making "interfering remarks" over the election. (Reporting by Adrian Croft; Editing by Jon Hemming)
