Britain's ambassador to Tehran denied on Sunday that he took part in a demonstration that broke out at a memorial for the 176 people killed when a plane was shot down.
Students held a gathering at Tehran's Amir Kabir University on Saturday evening to honour those killed hours after Iran admitted the Ukrainian airliner was downed by mistake.
Iran's Mehr news agency said the ambassador, Rob Macaire, was arrested for his alleged "involvement in provoking suspicious acts" at the gathering in front of the university.
"Can confirm I wasn't taking part in any demonstrations! Went to an event advertised as a vigil for victims of #PS752 tragedy," Macaire said on Twitter, adding he had been detained half an hour after leaving the area.
"Normal to want to pay respects -- some of the victims were British. I left after 5 mins, when some started chanting," he said.
"Arresting diplomats is, of course, illegal, in all countries," he added.
The British government said Macaire was arrested and detained briefly in the Iranian capital in what is called a "flagrant violation of international law".
Authorities in Tehran have yet to make any statements about the incident.
Iran's armed forces said on Saturday the Ukraine International Airlines Boeing 737 was mistakenly shot down, after denying for days Western claims it was brought down by a missile.
Police dispersed students who chanted "radical" and "destructive" slogans when the tribute to those killed in the air disaster turned into an angry demonstration, Fars news agency reported.
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