The Iraqi flag, signifying Palace Protection Force control, was then raised over the desert compound.
Stern-faced, Lieutenant-Colonel Patrick Sanders and his Iraqi counterpart stood together at the flagpole, shook hands and saluted each other.
But as they returned to the base together, the emotion of the moment broke through the formality and the two slapped each other on the back.
The significance of the event, which has been seen by many as the beginning of British withdrawal from Iraq, was lost on neither man.
Speaking afterwards, Lt-Col Sanders said: "It's a significant moment - this really marks the end of four years of British occupation and residency in Basra Palace and this is the point where Iraqis start to take matters into their own hands."
He said that the troops would be pulling back to the Contingency Operating Base at the airport and that this would hopefully cut down the endless number of mortar attacks that have plagued the base. He also believed that psychologically, the move was an important step for the Iraqis.
"The longer that we're here, the less inclined they are to run things for themselves," he said. "So by moving out of Basra I think what we'll start to see is slightly more subtle and sophisticated Iraqi answers to some of the problems that exist here in Basra.
"I hope that by removing ourselves from Basra, quite a lot of the violence which is directed at us - and over 90 per cent of the attacks are against British forces - will reduce and Basra will become a calmer and less violent place."
Basra has had a full-time British presence since the invasion of Iraq in 2003. It is the last of five provinces in the UK's sphere of operations in southern Iraq to move to local Iraqi control.
With the handover completed yesterday and Iraqis manning the gates of the Basra Palace base, people on the streets cheered the British departure and made clear their views on the drawing to an end of this four year presence.
"We are pleased that the Iraqi army are now taking over the situation. We, as Iraqi people, reject occupation. We reject colonialism. We want our freedom," resident Rudha Muter said.
Another resident, Khazaal al-Nisiri, said he was confident the Iraqi army could provide enough security without the British.
"We have recently seen intensive deployment for Iraqi security troops - this indicates that the Iraqi troops are in full control of the situation," he said.
Members of the Shiite al-Mahdi army cheered the withdrawal as a defeat for Britain. "They were facing catastrophe and withdrew because of the attacks by the al-Mahdi army," al-Mahdi army fighter Abu Safaa said.
But the British departure from the city, Lt-Col Sanders said, did not mean that they would not return if needed: "UK forces still retain security responsibility and we are prepared... to go back in and assist the Iraqis should we be asked to do so."
The 5,500 UK forces left in Iraq will retain security responsibility for Basra from their base at Basra Air Station, until control of the province is handed over to the Iraqi army in the autumn.
US troops will withdraw from position of strength, not failure, Bush claims
US TROOPS will be withdrawn from Iraq "from a position of strength and success, not from a position of fear and failure", George Bush said yesterday.
The US president said the decision would be based on a "calm assessment" of the situation on the ground by US military commanders and not by nervous Washington politicians reacting to poll results in the media.
His comments came as Prime Minister Gordon Brown insisted the withdrawal of British soldiers from their last base in Basra City did not amount to a "defeat" for the UK in southern Iraq.
The president addressed hundreds of troops during a surprise visit to al-Asad Air base in Anbar, Iraq, with his defence secretary, Robert Gates, and the secretary of state, Condoleezza Rice.
Meanwhile the Prime Minister said British forces in southern Iraq would retain the capacity to "re-intervene" in support of the Iraqi army, and would do so in "certain circumstances".
The overall number in the country would not fall for now, he said, allowing Britain to fulfil its duty to the Iraqi people.
"The numbers of troops are remaining roughly the same at this moment and we are staying to discharge our obligations to the Iraqi people and the international community," he said.