Iranian state television has aired new footage of two of the 15 Royal Navy personnel captured nine days ago.
Royal Marine Capt Chris Air and Lt Felix Carman were shown separately in front of a chart of the Gulf, where the Britons were seized on 23 March.
Capt Air said Iranian maps apparently showed the group was inside Iranian territorial waters. Lt Carman said he understood why Iran was angry.
The Foreign Office described showing the TV footage as "unacceptable".
In the footage shown on official TV channel Al-Alam, Capt Air is shown describing how the group was captured.
He said: "Approximately about ten o'clock in the morning we were seized - apparently at this point here from their maps on the GPS they've shown us - which is inside Iranian territorial waters."
He went on to say that the crew had been "treated very well".
Lt Carman also pointed to the map to indicate where the crew had been captured and said he understood why the Iranians were "angry about the intrusion".
Britain denies Iran's claims that the UK crew was in its waters and is demanding their "immediate" return.
In a statement, the Foreign Office said: "It's completely unacceptable for these pictures to be shown on television, given the potential to cause distress to their families."
BBC diplomatic correspondent James Robbins said there was "no question" that the footage would "intensify" the government's efforts to resolve the crisis diplomatically.
Although the showing of the video "poisoned the climate" it should not suggest that diplomacy was not working, he added.
Ex-Navy chief Admiral Sir Alan West told the BBC the UK personnel were under intense pressure.
"It's very unlikely that any of them would have had counter interrogation-type training which we give to people like aircrew and special forces when they go in," he said.
The footage was "a charade" set up for "internal show in Iran and other parts of the Arab world", he added.
Iranian students earlier threw stones and firecrackers at the British embassy in the capital Tehran in protest against what they said was the "illegal entry" into their waters by the UK personnel.
BBC correspondent Frances Harrison said the protesters were chanting "death to Britain" and calling for the deportation of the British ambassador.
The Britons, based on HMS Cornwall, were seized by Revolutionary Guards as they returned from searching a vessel in the northern Gulf.