Prime Minister Gordon Brown has denied that British troops had withdrawn from Basra Palace as part of a "defeat", insisting the move to Basra Air Station was an "organised" one.
Mr Brown, speaking as British troops completed their full withdrawal from the base, said troops would still be able to re-intervene in Basra in "certain circumstances".
Asked on the BBC Radio 4 Today programme if the move was a "pull-out in defeat... a retreat", Mr Brown said: "Let me make this very clear. This is a pre-planned, and this is an organised move from Basra Palace to Basra Air Station."
The MoD said in a statement: "Handing over Basra Palace to the Iraqi authorities has long been our intention, as we have stated publicly on numerous occasions. The Iraqi security forces want to take full responsibility for their own security and the handover is a step towards that goal."
Troops handed over full control of Basra Palace to the Iraqi army shortly before 1am on Monday local time, the Army said.
British spokesman in Basra Major Mike Shearer said: "I can confirm that ... multinational forces based at the continuing operating base started to secure the route for the repositioning of troops from Basra Palace. There were no major incidents during the operation and all troops were back at the continuing operating base by midday ... Iraqi time."
Maj Shearer added: "Full control was handed over to the Iraqis when we left Basra Palace."
The decision to pull out and hand over control was taken with the backing of the US and other coalition forces and in consultation with the Iraqi government, the Ministry of Defence said.
The pull-out from Basra Palace marks the end of a full-time British presence in the city and is bound to be seen as symbolic.
Basra is the last of five provinces in the UK's sphere of operations in southern Iraq yet to move to local Iraqi control, with British forces left in an "overwatch" role.
