"The eight British sailors, including six soldiers and two ranking military officials, have been released," a Foreign Ministry spokeswoman told The Associated Press Wednesday.
The British government said it had not yet been notified that the men had been freed, reports CBS News Correspondent Steve Holt in London.
The decision to free the eight, who have been held since Monday, defused a brewing diplomatic crisis between London and Tehran. Iran had earlier threatened to prosecute the men, while Britain insisted they had simply strayed off course while working as part of the U.S.-led coalition in Iraq.
The men were detained Monday in the Shatt-al-Arab waterway, which runs along the Iran-Iraq border and is known in Iran as the Arvand River. Iran said the vessels were about a half-mile inside Iranian territorial waters.
A top military official told state-run radio that the sailors were being released because their intrusion into Iran's waters was a mistake.
"Considering statements by British sailors that the boats carrying them mistakenly entered Iran's territorial waters, the armed forces decided to release the boats and their occupants," Armed Forces spokesman General Ali Reza Afshar told state radio earlier Wednesday.
"Those detained were carrying full military equipment and specialized maps of the region. After our investigation, it became clear that the equipment was for use in their coastal patrol mission," the radio quoted Afshar as saying.
British Foreign Secretary Jack Straw phoned Kharrazi Tuesday to ask for the sailors' release. Britain had said they were on a mission to deliver a patrol boat for the new Iraqi Riverine Patrol Service
The men were shown on Iranian television blindfolded and seated cross-legged on the ground. On Tuesday, two sailors were shown on television apologizing for mistakenly entering Iranian waters.
"My name is Sgt. Thomas Harkins from the British Royal Marines. I do apologize for entering Iranian territorial waters," one said.
British-Iranian relations have run hot and cold for years. The detentions follow a fresh strain after London helped draft a resolution International Atomic Energy Agency's board of governors.for past nuclear cover-ups at last week's meeting of the
Iran says its atomic program is aimed only at producing energy, while the United States accuses Tehran of trying to develop nuclear weapons. Iran accused Britain, which it had seen as a partner in the investigation into its nuclear activities, of caving in to U.S. pressure.
Iranians repeatedly demonstrated in front of the British Embassy in Tehran last month, throwing stones at the building to protest the U.S.-led occupation of Iraq. Britain is America's main coalition partner.