Defence officials said the withdrawal of about 550 troops from Basra Palace downtown - targeted by daily mortar and rocket attacks - was going well, but could take days to complete.
The base used to be one of Saddam Hussein's palaces.
The troops are expected to pull back to join their 5,000 colleagues at the vast British airbase on the outskirts of the city.
British forces will operate from the air base but "retain security responsibility for Basra until we hand over to provincial Iraqi control, which we anticipate in the autumn", the defence ministry said.
Officials said the decision to withdraw the small, vulnerable garrison from the city and consolidate at the airport had long been planned.
A spokesman for Gordon Brown, the prime minister, speaking on condition of anonymity, said it had "always been our intention to draw down troops in Basra" as Iraqi army and police become ready to handle security duties.
US policy criticised
The Basra withdrawal comes amid condemnation by a second former UK army chief of the US for its "fatally flawed" policy in Iraq.
Major-General Tim Cross, the most senior British officer involved in post-war Iraq planning, told the Britain's Sunday Mirror he had been "very concerned" about the lack of detail that had gone in to plans to rebuild Iraq after the invasion.
|Jackson has criticised US handling of Iraq's |
post-war reconstruction [GALLO/GETTY]
He said Donald Rumsfeld, the former US secretary of defence, had dismissed concerns regarding the lack of sufficient troop numbers to maintain security and assist in Iraq's reconstruction.
"He didn't want to hear that message. The US had already convinced themselves that Iraq would emerge reasonably quickly as a stable democracy.
"Anybody who tried to tell them anything that challenged that idea - they simply shut it out."
The remarks by Cross follow those of General Sir Mike Jackson, head of the British army during the Iraq war, who criticised the US for how Iraqi reconstruction was handled.
The generals' criticism was rejected by John Bolton, the former US ambassador to the UN.
Speaking on a BBC programme, he said that Jackson's remarks "read into a version of history that simply is not supported by the evidence".
Bolton said: "I'm not saying that we got it right in Washington because I've made my own criticisms. His [criticisms] just happen to be way off the mark, very simplistic [and] I think in a sense limited by the role that he had."