The FCO said the arrest of Rob Macaire after a vigil for victims of last week’s plane crash was illegal and should be investigated.
Foreign Secretary Dominic Raab said the UK would “demand an apology” and seek assurances it will not happen again.
Iranian ambassador Hamid Baeidinejad is expected to attend the FCO later.
Mr Macaire was attending an event on Saturday, which was advertised as a vigil for the 176 people who died in Wednesday’s crash of an Ukraine International Airlines Boeing 737, shortly before he was arrested.
He was held for three hours when he stopped at a barber shop for a haircut on his way back to the British embassy.
In a tweet, following his arrest, the ambassador said he was attending the vigil because it was “normal to want to pay respects”, adding that some of the victims were British.
On Monday, Mr Raab told the Commons he welcomed “overwhelming international support” after meeting with representatives in Brussels, Washington and Montreal.
And he called for a “full, transparent and independent investigation” into the crash.
“The regime in Tehran is at a crossroads,” he said. “It can slip further and further into political and economic isolation.
“But there is an alternative and the regime does have a choice – the diplomatic door remains open, now is the time for Iran to engage in diplomacy and chart a peaceful way forwards.”
The UK has been working with the Canadian-led response group to the crash in order to help repatriate bodies of victims, he added.
Boris Johnson and German Chancellor Angela Merkel condemned Mr Macaire’s arrest in a joint statement following a phone call on Sunday.
Meanwhile, Downing Street has said it will “do everything we can” to support British families affected by the downed plane – including help in seeking compensation.
Five nations whose citizens were onboard the airliner will meet in London on Thursday to discuss possible legal action, Ukraine’s foreign minister told the Reuters news agency.
Vadym Prystaiko said representatives from Canada, Sweden, Afghanistan, and another unnamed country would also discuss compensation and the investigation into the incident.
Protests have been taking place on the streets of the Iranian capital, Tehran, to vent anger at officials who initially denied shooting down the jet.