"This morning, three British boats with eight people on board entered Iranian territorial waters. The Iranian navy, in accordance with their duties, seized these boats and arrested the crew," spokesman Hamid Reza Asefi said in a statement on Monday.
"Currently they are being interrogated and an investigation is under way," he added. Official sources said the small patrol boats were armed with heavy machine-guns, and identified the detained Britons as "Royal Navy commandos".
A British military spokesman in Iraq said: "We can confirm three small Royal Navy patrol boats and eight crew have been out of communication since the early hours of this morning.
"Their last known indication was to be in the Shatt al-Arab area which is not unusual. There are no further details at present."
Iranian state television's Arabic-language channel, Al-Alam, said Iranian forces had also seized GPS devices, assault rifles, pistols, cameras and detailed maps of the Iran-Iraq border area.
The British soldiers were detained shortly before midday and had "confessed that they had made a mistake", Al-Alam said, adding it would show television footage of the British detainees later the same day.
Playing it down as a "low-level incident", a Royal Navy spokesman at the defence ministry in London said the three small boats appeared to have "strayed into Iranian territory".
"... Maybe, it was disputed whose side of the border the vessels were on"
Royal Navy spokesman
"These boats are used for training Iraqi river patrol service... what we would call river police," said the spokesman, who was unable to specify if any Iraqis were on board.
"The waterway runs over a mile (1.6 kilometres) wide. The border runs pretty much down the middle of it... Maybe, it was disputed whose side" of the border the vessels were on, he said on Monday.
Intention to prosecute
A Foreign Office spokeswoman in London said Britain's Foreign Secretary Jack Straw spoke by telephone with his Iranian counterpart Kamal Kharrazi about the seizure of the British vessels and crew on Tuesday morning.
She declined to give any details of the talks and could not say whether there had any been any progress on getting the soldiers released.
"Iran intends to prosecute the eight British detainees on charges of illegally entering Iran's waters," al-Alam reported, citing unnamed Iranian military sources.
"The British military officials were arrested after they entered 1,000 metres into Iranian waters. The British confessed that they were arrested when they were inside Iran's waters."
A spokeswoman for the British Embassy in Tehran said British diplomats had requested permission to visit the detained men.
''Anyone from any nationality entering our waters will face the same response.''
Revolutionary Guard spokesman
"We have asked for full details on who is holding them, where they are and for access to them," she said.
The British government said on Tuesday it was demanding an explanation from Tehran on media reports that eight British sailors arrested in Iranian waters on Monday are to be prosecuted.
''There is no official statement form the Iranian government that the eight soldiers will be prosecuted, however there is a possibility'', said an Aljazeera correspondent in Tehran.
Revolutionary Guard spokesman Masud Jazairi said Iran is determined to defend its territorial integrity. ''Anyone from any nationality entering our waters will face the same response.''
British armed forces control a large area of southern Iraq around the city of Basra, and along with Iraqi security forces patrol parts of the Shatt al-Arab, mostly to combat smugglers and anti-occupation forces seeking to enter Iraq.
Contacts with Iranian troops along that border area have generally been described by British sources as "cordial", and Monday's incident is the most serious in the sensitive area since last year's US-led invasion of Iraq.
The Shatt al-Arab border demarcation was a constant source of dispute - and of conflict during the 1980-1988 war between Iran and Iraq - under Saddam Hussein, until a deal was struck for the frontier to run at the mid-way point.
UK-Iran relations have been
The British embassy in Tehran said it was in touch with Iranian officials.
Ties between Britain and Iran have been strained in recent months, with the embassy in Tehran being targeted by a string of angry demonstrations sparked by an Iraqi prisoner abuse scandal as well as the entry of occupation troops into Iraqi holy Shia cities.
Britain was also the co-sponsor of a resolution passed by the International Atomic Energy Agency last Friday that heavily criticised Iran for failing to fully cooperate with an investigation into its nuclear programme.