Work has begun to construct Britain's first new permanent military base in the Middle East since 1971.
Foreign Secretary Philip Hammond and naval personnel attended a ceremony to mark the start of construction of HMS Juffair at Mina Salman Port in Bahrain.
The establishment is being developed to support Royal Navy deployments in the Gulf through the creation of a permanent and improved base.
Mr Hammond said it showed the UK's commitment to the region.
Mr Hammond said: "The presence of the Royal Navy in Bahrain is guaranteed into the future, ensuring Britain's sustained presence east of Suez.
"The new facility will enable Britain to work with our allies to reinforce stability in the Gulf and beyond."
Philip Hammond and Bahraini Foreign Minister Sheikh Khalid bin Ahmed Al Khalifa laid the first cornerstone of the new base
Bahrain has been criticised over allegations of serious human rights abuses, but Mr Hammond said the UK was helping the Persian Gulf State to change.
He said: "Bahrain is not perfect by any means, but it at least knows what it has to do and it is taking steps to do it.
In some cases, he said, the state's authorities were "seeking our support to help them reform., for example, their police force, their judicial system, their prison service... to gradually improve the standards and bring it closer to what we would expect to see."
The BBC's security correspondent Frank Gardner said the UK's growing military commitment to the Gulf was "likely to remain controversial".
Its opponents and backers would expect to expect to see "tangible progress to reform", he added.
Bahrain has paid most of the £15m ($23m) needed to build the base, with the British paying ongoing costs.
Mr Hammond, in a speech to a security summit in the country, said the UK had been late to recognise the need to tackle the extremist views behind terrorism.
Addressing the event in Manama, Mr Hammond said that countering Islamist extremism was "the great challenge of our time".