Iranian President Mahmoud Ahmadinejad announced at a news conference in Tehran that the 15 British sailors and marines would be freed as a "gift to the British people". The following is a partial transcript from the news conference.
"On the occasion of the birth anniversary of the great
prophet of Islam, and on the occasion of Easter and
Passover, I would like to announce that the great nation of
Iran, while it is entitled to put the British military
personnel on trial, has pardoned these 15 sailors and gives
their release to the people of Britain as a gift.
"I would like Mr Blair's government not to punish the sailors for
acknowledging and telling the truth.
"After this meeting they are free. They can go to the airport and they can go to their families.
"I ask Mr Blair instead of occupying the other countries, I ask Mr Blair to think about the justice - to think about the truth and work for the British people not for himself."
He said the British people should be told the truth about what the "British soldiers" were doing in Iranian waters.
"Unfortunately, the British government not even was brave to tell their people - to tell them the truth - and tell them that [there] was a mistake. I'm sure the British people have every right to ask their government... what their soldiers were doing in Iraq or in Iranian water. I leave it to the British people to decide."
Mr Ahmadinejad said the people of Iran were very upset at what he called the "invasion by the British sailors".
And he praised the bravery of the Iranian commander who captured the Brits.
"At this moment I wanted to say on behalf of the Iranian people - I wanted to thank the people who... arrested [them], I'm... admiring the commander who managed to capture these people who came to our water. I wanted to thank him for his braveness and I give him the third kind of medal."
The BBC's Frances Harrison asked him what prompted his change of heart.
"I didn't change my decision suddenly. From the beginning, I didn't want to have any confrontation. We wanted our rights and we really didn't want to have any confrontation. The British government behaved badly and it took longer. "
In response to another reporter's question, President Ahmadinejad said that no concessions had been made by the British government in order to secure the releases, but that the British government had assured Iran the incident would not be repeated.
"Nothing specifically has been done by the United Kingdom. The UK government has sent a note, a memo, to the ministry of foreign affairs of the Islamic Republic of Iran, and in that letter they mentioned that incident would not be repeated. Of course, that decision that we are going to release the 15 British sailors is not related to that letter, and it was a present from the Iranian people to the British people."
Our correspondent also asked President Ahmadinejad if he had any message for the 15 sailors and marines.
"These personnel are the same as the other people... We respect them as human [beings] and the messages are what I said - we are a peaceful people, we want to have peace and security - we want peace and security for all people.
"We are very upset that the British people... [went] to [war] and thousands of kilometres far away from their country, fighting somewhere which is not legal - we are upset about that."