William Hague has said the UK will recognise the Libyan rebel council as the “sole governmental authority”, as Gaddafi-regime diplomats are expelled.
The Libyan charge d’affaires was called to the Foreign Office earlier to be told he and other diplomats must leave.
Instead the UK will ask the National Transitional Council to appoint a new diplomatic envoy.
It follows similar moves by the US and France. The UK previously said it recognised “countries not governments”.
But Mr Hague said it was a “unique situation” and said recognising the NTC could help “legally in the unfreezing of some assets”.
The green flag of the Gaddafi regime was still flying outside the embassy in Knightsbridge on Wednesday afternoon and attempts to reach staff for comment were not successful. Protesters carrying the red, green and black flag of the Libyan rebels gathered outside.
Libyan rebels and pro-Gaddafi forces are still locked in battle, five months after an uprising began against Muammar Gaddafi’s 42-year rule, as Nato continues to enforce a UN-backed no-fly zone over the country.
At a press conference, Mr Hague said the NTC had shown its commitment to a “more open and democratic Libya… in stark contrast to Gaddafi whose brutality against the Libyan people has stripped him of all legitimacy”.
The foreign secretary also outlined measures to unfreeze assets worth £91m belonging to an oil company now controlled by the NTC to help meet “basic needs” in Libya.