Students from Iran's Islamic Bassij militia on Wednesday set fire to American, British and Israeli flags outside the former US embassy in Tehran, AFP journalists said.

Some 30 people took part in trampling and burning the flags at a ceremony to unveil a plaque on the embassy's fence of 100 derogative expressions to describe the United States.

The phrases, all used by the Islamic republic's late founder Ayatollah Ruhollah Khomeini, included: "Great Satan", "criminals", "corrupt", "arrogant" and "anti-Koran".

The flag-burning comes just a month and a half after the signing of a landmark nuclear deal between Iran and world powers, including the US and Britain.

On Tuesday, Iranian police arrested merchants for selling clothing that featured the flags of the United States and Britain.

Iran does not recognise the state of Israel, and has a history of troubled relations with the US and Britain.

Washington broke off relations with Tehran in 1980 after Islamist students took American diplomats hostage in the US embassy in Tehran following the 1979 Islamic revolution.

Iran has accused Britain, along with the US, of orchestrating a coup against nationalist prime minister Mohammed Mossadegh in 1953.

But after July's nuclear deal, Britain and Iran reopened their respective embassies in Tehran and London last month, after a four-year closure.