The red, blue, yellow and green national flag was placed on the Peros Banhos atoll on Monday by Mauritian officials, who arrived by boat accompanied by Chagos islanders exiled more than 50 years ago.
Originally intended as a scientific survey, Mauritius's prime minister described the "historic visit" as "the first time Mauritius has led an expedition to this part of its territory".
The UK Foreign Office responded unequivocally.
"The UK has no doubt as to our sovereignty over the British Indian Ocean Territory, which we have held continuously since 1814. Mauritius has never held sovereignty over the territory and the UK does not recognise its claim.
"We are honouring the assurances we gave to Mauritius that we would not interfere with this survey."
Mauritian Prime Minister Pravind Jugnauth recorded a message that was broadcast to the officials and Chagossians who travelled to the atoll to raise the flag, according to a Guardian report.
"I'm delighted that our Chagossian brothers and sisters are able to travel to their birthplace without any foreign escort," he said in the address.
"The message I wish to give out to the world, as the state with sovereignty over the Chagos archipelago, is that we will ensure a wise stewardship of its territory — over its maritime security, conservation of the marine environment and human rights, notably the return of those of Chagossian origin."
A plaque placed below the flagpole is reported to read: "Visit of the Mauritius delegation to Peros Banhos archipelago, Republic of Mauritius, in the context of the scientific survey of Blenheim Reef."
Peros Banhos atoll is north east of the Chagos archipelago, currently part of the British Indian Ocean Territory.
Chagossians were expelled from the archipelago in the late 1960s and early 1970s to make way for a joint US/UK airbase on the island of Diego Garcia, with Peros Banhos atoll being the final island that was cleared.
Successive UK governments have expressed regret about the way that Chagossians were removed, and London has provided a £40 million ($54.1m) support package to the exiled islanders over a 10-year period.
In 2020, following a Chagos Islands ruling by the International Court of Justice, the UK government said it has "a long-standing commitment, first made in 1965, to cede sovereignty of the territory to Mauritius when it is no longer required for defence purposes".