UK Muslims should obey British law as well as accepting the obligations of citizenship, the former president of Iran has urged.
Mr Khatami called for greater understanding between religions
Mohammad Khatami, during a three-day visit to Britain, told BBC News the UK was right to fear radicalism.
But it had added to the problem by getting involved in Iraq, he said.
Mr Khatami, the most senior Iranian to visit the UK since the 1979 Islamic revolution, said his mission was to remove barriers between East and West.
His attempts at moderation and reform in Iran were ended by the election of the hard line President Mahmoud Ahmadinejad last year.
But, in an interview with BBC Radio 4's Today programme, he said he was still working to tackle extremism wherever it existed.
Mr Khatami condemned "insurgent terrorism" in Iraq.
And he also criticised the "extremist" Bush administration.
The former president said his mission was to break down barriers between the great religions and civilisations of East and West.
To that end, Mr Khatami said that, while British Muslims should recognise they had no religious obligation to wear a veil, they also had the right to wear one.
"You are British first," he said - before calling for the Muslim faith to be fully respected in a Christian country.
On Tuesday, Mr Khatami received an honorary degree from the University of St Andrews.
After being met with protests from some students and Iranian exiles, he delivered a lecture in which he talked of a "borderless friendship".
Opponents claim people were tortured, jailed and executed during Mr Khatami's presidency.
His visit to St Andrews provoked fury from human rights organisations and politicians.