Iran will simultaneously reopen its embassy in London with Deputy Foreign Minister in Financial and Executive Affairs Danesh Izadi.
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“There is already enough suspicion on both sides and without that we’d be in a far worse position”.
“Four years on from an attack on the British embassy, I am today re-opening it”, Hammond said in a statement.
Majid Takht-e-Ravanchi also told state television on Saturday that the Iranian Embassy in London also will reopen at the same time.
Foreign Ministers from France, Germany and the EU have all visited Tehran since the deal, with business leaders joining the trips.
However, Mr Hammond remained cautious: “This move does not mean that we agree on everything”.
Ravanchi added that Iran will pay for damage done to the British embassy buildings and assets during a protest that ended in the closure of the embassy four years ago.
A trade delegation will travel to Tehran with Mr Hammond and the Exchequer Secretary to the Treasury Damian Hinds to discuss possible future trade opportunities.
The thaw with Iran began with the June 2013 election of Iranian President Hassan Rouhani, a reputed moderate who reached out to the West.
The UK responded by closing the Iranian embassy in London later that month.
“President Rouhani’s election and last month’s nuclear agreement were important milestones”, Hammond said.
Students rampaged for hours through Britain’s diplomatic compounds in Tehran, tearing down the British flag, ripping up pictures of Queen Elizabeth II and trashing offices.
Iran and Britain severed their diplomatic ties in November 2011.
Plans to reopen the embassy were announced in June past year.
Europe is keen on renewing trade ties with Iran and most countries have diplomatic representation in Teheran.
The reopened British embassy will be staffed initially by a small number of diplomats led by Ajay Sharma, who has been non-resident chargé d’affaires since 2013.
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The Foreign Office later eased its advice against travelling to Iran saying the risk faced by British nationals had changed in parts of the country.
