"Sweden has been asked to act as protecting power for the United Kingdom in Iran. We are pleased that Sweden is able to take on this mandate in the situation that has arisen," said Minister for Foreign Affairs Carl Bildt in a statement.
Britain shut its mission in Tehran in November after it was attacked by protesters angry at sanctions against the Islamic republic's nuclear programme.
Sweden will start its role on Sunday, the British Foreign Office said in a statement.
"We are very grateful to Sweden for agreeing to take on the role of 'protecting power', looking after the interests of the UK in Iran," a Foreign Office spokesman said.
"A British interests section will open under the auspices of the Swedish embassy in Tehran from July 15.
"We have accepted the Sultanate of Oman as the Islamic Republic of Iran's protecting power in the UK."
Foreign Secretary William Hague last year accused the Iranian government of tacit support for the attack on its embassy.
Britain ordered all Iranian embassy staff in London to leave, though diplomatic relations were not cut off completely.
"Following the unacceptable attack on our embassy last year by Iranian state-backed militia we reduced our diplomatic relations with Iran to their lowest level," the statement added.
"These new arrangements will help us continue essential business on a formal basis.
"The British interests section will provide limited consular assistance for emergencies only, as well as look after the staff and property of the British embassy in Tehran.
"We have had an embassy in Iran for many years. And we would like to do so again in the future.
"But until that time arrives, we are confident that our interests in Tehran will be well looked after by the Swedish embassy."