Iran said it is considering charging 15 British sailors and marines with illegally entering its waters.
Iran captured the 15 sailors at the mouth of the Shatt al-Arab waterway, which marks the southern stretch of Iraq's border with Iran, in the Gulf on Friday.
The charge against them is the illegal entrance into Iranian waters Manouchehr Mottaki
A senior Iranian foreign ministry official told Britain's envoy to Tehran at a meeting today that the sailors were "fit and well and in Iran", a British Foreign Office official said.
British Prime Minister Tony Blair denied the sailors had been in Iranian waters and warned Tehran over the detentions.
"This is a very serious situation, and there is no doubt at all that these people were taken from a boat in Iraqi waters," Mr Blair said. "They [Iran] should not be under any doubt at all about how seriously we regard this act, which was unjustified and wrong."
"The charge against them is the illegal entrance into Iranian waters and this issue is being considered legally," Iranian Foreign Minister Manouchehr Mottaki said at the United Nations.
An Iranian official said Mr Mottaki told British Foreign Secretary Margaret Beckett that Iran may give British diplomats access to the detained sailors at some later stage.
Britain said two boatloads of Royal Navy sailors and marines had searched a merchant vessel on a UN-approved mission in Iraqi waters when Iranian gunboats encircled and captured them.
The incident raised tensions that were already high with the West over Tehran's nuclear programme.