Iran has seized three UK navy vessels and eight crew members inside its territorial waters near the Iraq border, UK defence officials confirmed.
British military patrols have been working with Iraqi coast guards
UK diplomats are now in close contact with Iranian officials both in London and Tehran over the incident on the Shatt al-Arab river.
The UK ministry of defence said the detained sailors were part of a Royal Navy training team heading to Basra.
Iran said the vessels had entered its waters without permission.
Film of the detained crew has been broadcast on Iranian television.
The UK defence ministry said in a statement: "We can confirm that eight Royal Navy personnel from the Royal Navy training team based in southern Iraq have been detained by the Iranian authorities while delivering a boat from Umm Qasr to Basra.
"The team were travelling in three boats - two Boston Whalers and one British Army Combat Support Boat - along the Shatt al-Arab waterway this morning. The boats are unarmed but the crews were carrying their personal weapons."
The BBC's Jim Muir in Tehran says the British embassy there has not been told where the sailors are being held or who is holding them.
Iran has said that after being intercepted and escorted to the Iranian shore, the men are being questioned to establish what they were doing in Iranian waters, our correspondent adds.
The confirmation came several hours after news of the incident emerged via Iranian state-run television.
At first, British officials merely said that they had lost contact with the vessels.
A spokesman for the Iranian foreign ministry, Hamid Reza Asefi, said the three vessels had entered Iranian waters on Monday morning.
THE SHATT AL-ARAB
120 miles of tidal waterway
Formed by Tigris and Euphrates rivers
Subject to 1639 Persian-Ottoman treaty
Southern stretch forms border between Iraq and Iran
River is vital trade route for both countries
Control of river one of disputes causing Iran-Iraq war in 1980
"Iran's naval forces, acting on their legal duty, confiscated the vessels and arrested the crew," he added.
An Iranian military spokesman indicated the detained crew could be freed quickly if an inquiry shows there had been no malicious intent.
He said the Revolutionary Guards were now waiting for the Iranian foreign ministry to take up the case.
A spokesman at the UK defence ministry said British forces in Iraq were using boats to train the Iraqi river patrol service, and the craft may have strayed across the maritime border by mistake.
"The waterway runs over a mile wide. The border
runs pretty much down the middle of it," he said.
Iranian naval sources quoted by Iran's official Arab-language al-Alam satellite TV news station said weapons and maps were found on board the vessels.
Our Tehran correspondent says a rapid solution to the incident may no longer be possible, because the issue has moved into the political arena.
He says relations between Britain and Iran are always delicate and are currently somewhat tense over Iraq, human rights, Iran's nuclear programme and other issues.
The BBC's diplomatic correspondent, Bridget Kendall, says no-one is suggesting that this is a deliberate gesture by Iran of diplomatic retaliation.
But our correspondent describes UK-Iranian relations as a difficult balancing act, with British forces in southern Iraq apparently under orders to keep border tensions with Iran to a minimum.
Our correspondent says the worry remains that it could easily escalate into a more serious crisis.