"An Iranian military commander has said the 15 Royal Navy sailors and marines seized in the Gulf have admitted entering Iranian waters illegally.
The Britons are reported to have been taken to Tehran for questioning.
Britain insists they were on a routine patrol in Iraqi waters when they were surrounded and captured by forces from the Iranian Revolutionary guard.
Foreign Office minister Lord Treisman met with the Iranian Ambassador earlier to demand their release.
Iranian news agencies quoted Iran's Deputy Commander Alireza Afshar as saying: "These people are under investigation and have confessed they have violated the waters of the Islamic Republic of Iran.
"The investigation is going on and they are healthy and there is no problem."
The EU is also demanding their immediate release.
The developments coincide with UN deliberations over possible sanctions against Iran over its refusal to abandon work on producing enriched uranium needed to build a bomb.
The naval boarding party, from frigate HMS Cornwall, were surrounded after carrying out a routine search of a boat which they suspected of smuggling.
Britain has been plunged into a potentially dangerous new diplomatic crisis after the group was seized at gunpoint in the Shatt al-Arab waterway on Friday.
The military personnel had completed a routine search of a large cargo dhow which they suspected of smuggling in the northern Persian Gulf.
The group of eight sailors and seven Marines is believed to include at least one woman."
While there are frantic diplomatic measures underway, it's clear that the beasts of Persia fear no one and are intent on making a mockery of international laws and will do as they please in this matter.
Coming upon the heels of pressure from the civilized world to cease nuclear activities, this is the iranian way of saying, "Fuck you very much" to everyone NOT a barbarian.
The old Britain would have launched a Falkland-like response to free their servicemen, but the new Britain is lacking in both courage and hardware so look for this to play out for as long as the moslems wish it to.