The Iranian consul in Basra charged Thursday that British soldiers had surrounded his office in the southern city and fired shots into the air. Britain denied the allegation.
The allegation comes at a critical period in the crisis over Iran's seizure of 15 British sailors and marines.
The Ministry of Defense in London said the shooting was an exchange of gunfire after British troops on a foot patrol near the Iranian consulate were ambushed.
But Iranian Consul-General Mohammed Ridha Nasir Baghban said British forces had engaged in a "provocative act" that "could worsen the situation of the British sailors."
"British forces should rely on wisdom and not react because of the British forces' detention. This reflects negatively on bilateral relations," Baghban told The Associated Press in a telephone interview.
Baghban claimed British forces surrounded the consulate about 10 a.m. and fired randomly into the air.
In a statement distributed to journalists, British forces in Basra denied any aggressive action against the Iranian consulate, saying that a patrol was ambushed near the consulate and that it was returning fire.