By the sixth day of the siege the gunmen had become increasingly frustrated at the lack of progress in meeting their demands. That evening, they killed one of the hostages and threw his body out of the embassy. As a result, the British government ordered the Special Air Service (SAS), a special forces regiment of the British Army, to conduct an assault to rescue the remaining hostages. Shortly afterwards, soldiers abseiled from the roof of the building and forced entry through the windows. During the 17-minute raid, the SAS rescued all but one of the remaining hostages, and killed five of the six terrorists. The soldiers subsequently faced accusations that they unnecessarily killed two of the terrorists, but an inquest into the deaths eventually cleared the SAS of any wrongdoing. The remaining terrorist was prosecuted and served 27 years in British prisons.

The hostage-takers and their cause were largely forgotten after the Iran–Iraq War broke out later that year and the hostage crisis in Tehran continued until January 1981. Nonetheless, the operation brought the SAS to the public eye for the first time and bolstered the reputation of Margaret Thatcher, the Prime Minister. The SAS was quickly overwhelmed by the number of applications it received from people inspired by the operation and, at the same time, experienced greater demand for its expertise from foreign governments. The building, having suffered major damage from a fire that broke out during the assault, was not reopened as the Iranian embassy until 1993.