The British Council, Britain's cultural diplomacy arm, has suspended its operations in Tehran with its head accusing the Iranian government Thursday of trying to intimidate staff.
The cultural and educational body closed Jan 31 after the Iranian president's office asked most of its 16 local employees to resign, the British Council said.
"In the last week of December, most of the sixteen locally-appointed members of staff were summoned for interviews at the Iranian Office of the President where it was suggested to them that they should resign from their posts with the British Council.
"This follows on from an incident where two members of staff had their passports confiscated after attempting to leave the country to go to a routine meeting," it added.
British Council Chief Executive Martin Davidson said the actions by Iranian authorities were "unacceptable".
"They are designed to pressurise our staff with the clear intention of stopping our cultural and educational work in the country," he said.
"There are no winners here. Our staff in Iran have lost their jobs; our Iranian partners have lost opportunities to work with the UK; and young people in Iran and the UK have lost the chance to build links that can last a lifetime," said Davidson.
Relations between Iran and Britain have worsened in recent years, with Washington and London suspecting Iran of trying to develop nuclear weapons, a claim that is rejected by Tehran.