Britain said it was outraged and warned of "serious consequences." The U.N. Security Council condemned the attacks "in the strongest terms." President Barack Obama said he was disturbed by the incident and called on Iran to hold those responsible to task.
The attacks come at a time of rising diplomatic tension between Iran and Western nations who last week imposed fresh sanctions over Tehran's nuclear program, which they believe is aimed at achieving the capability of making an atomic bomb.
Iran, the world's fifth biggest oil exporter, says it only wants nuclear plants to generate electricity.
The embassy storming is also a sign of deepening political infighting within Iran's ruling hardline elites, with the conservative-led parliament attempting to force the hand of President Mahmoud Ahmadinejad and expel the British ambassador.
"Radicals in Iran and in the West are always in favor of crisis ... Such radical hardliners in Iran will use the crisis to unite people and also to blame the crisis for the fading economy," said political analyst Hasan Sedghi.
Several dozen protesters broke away from a crowd of a few hundred outside the main British embassy compound in downtown Tehran, scaled the gates, broke the locks and went inside.
Protesters pulled down the British flag, burned it, and put up the Iranian flag, Iranian news agencies and news pictures showed. Inside, the demonstrators smashed windows of office and residential quarters and set a car ablaze, news pictures showed.