Iran has denied UK claims that it is responsible for explosions in Iraq that have caused the deaths of eight British soldiers.
A senior British official linked the type of bombs used in the attacks to Iran's Revolutionary Guards.
He said they had provided technology to a Shia Muslim group in southern Iraq.
An Iranian foreign ministry spokesman denied the charge, saying it was a "lie" and accusing Britain of fomenting unrest in Iraq.
Speaking on Iranian TV, Hamid Reza-Asefi said: "This is a lie. The British are the cause of instability and crisis in Iraq.
"By drafting such scenarios they are trying to find a partner in their crimes."
He added: "From the very beginning, we have stated our position very clearly - a stable Iraq is in our interests and that is what the Iraqi authorities have said themselves on many occasions," reports BBC.
According to the New York Times, British officials have been hinting for several weeks that they suspect Iranian involvement in a sharp surge in attacks since eight British soldiers were killed over the summer. But the report yesterday was the most explicit public accusation so far.
The official linked the allegation to the nuclear dispute with Iran.
"It would be entirely natural that they would want to send a message: 'Don't mess with us.' It would not be outside the policy parameters of Tehran," the official said, according to the Press Association.
British Foreign Office officials who normally deal with Iranian issues could not immediately be contacted to comment on the report.