"My decision is an important diplomatic step which signals to Tehran that its behaviour is totally wrong", he said.
"It is unlikely to be a magic wand that leads to an overnight result but it demonstrates to the whole world that Nazanin is innocent and the United Kingdom will not stand by when one of its citizens is treated so unjustly".
Iran does not recognise dual national status, and so do not formally recognise Zaghari-Ratcliffe's right to be represented by Britain.
Her husband Richard who has been lobbying Hunt and the previous foreign secretary Boris Johnson for diplomatic protection for his wife since 2017, welcomed the move.
It is not the same as diplomatic immunity, which is something given to diplomats to ensure their safe passage and protection from prosecution. But it will allow Britain to raise her case with greater ease at global forums such as the United Nations.
Nazanin Zaghari-Ratcliffe has been imprisoned by the theocratic dictatorship on trumped charges of spying, allegations she has always denied.
Hunt was asked by BBC radio if he would now summon Iran's ambassador, take Iran to an worldwide court, or impose sanctions.
He added that diplomatic protection had not been granted to a British citizen in 100 years.
It is hard to know how Iran will react to the use of diplomatic protection.
'The Iranian government could still refuse a visit but under worldwide law that process could be escalated'.
"No government should use innocent individuals as pawns for diplomatic leverage so I call on Iran to release this innocent woman so she can be reunited with her family".
The Iranian regime will now face increasing worldwide pressure as it upgrades the issue from a consulate issue to a state-on-state issue.
Her four-year-old daughter remains with Zaghari-Ratcliffe's mother in Tehran.
Mrs Zaghari-Ratcliffe, 41, has dual British and Iranian citizenship.
"Until yesterday, it was our problem that the British government was sympathetic with, in solidarity with, trying to help us along the way", Mr Ratcliffe told the BBC. Up until this point Nazanin's case has been treated as consular matter - essentially a dispute between Nazanin and the Government of Iran. Her psychological state is now perilous, and she is suffering from significant neurological and other physical health issues.
She has also been banned from seeing an outside psychiatrist, it said.
Hunt said London wanted to make Iran aware that it had no intention of letting Zaghari-Ratcliffe languish in jail.
And Liberal Democrat spokeswoman for foreign affairs, Jo Swinson, described Mr Hunt's decision as "a promising and welcome step in the right direction".
Nazanin Zaghari-Ratcliffe, who worked as a project manager for the Thomson Reuters Foundation, was detained while she was with her young daughter after visiting family in Iran in April 2016, Reuters reports.
She is now serving a five-year sentence in Iran.
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