The historic step marks a thawing of relations between the Islamic state and Western powers, but Hammond told the BBC that there was still disagreement on major issues.
Read: Britain reopens embassy in Tehran
"We should tread carefully. There's a deep legacy of distrust on both sides and we have major areas where we have very substantial policy differences."
However he said both countries saw "eye to eye" on the need to tackle Islamic State (IS) militants but conceded there was a disagreement on human rights issues in Iran.
Read: Too soon for 'illogical' US to return to Tehran: Iran
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