The move comes amid escalating tensions with Iran, after Washington last week said it had detected new and urgent threats from the country.
The US state department ordered the pullout of employees from both the embassy in Baghdad and its consulate in Erbil, the embassy said in a statement.
It said Iran and its proxy forces in the region were targeting its citizens and American interests.
On Sunday, the embassy advised Americans to avoid travel to Iraq, citing “heightened tensions”.
Referring to the embassy and the consulate in Erbil, the statement from the embassy said “normal visa services at both posts will be temporarily suspended”.
It added: “The US government has limited ability to provide emergency services to US citizens in Iraq.”
The statement recommended those affected “depart by commercial transportation as soon as possible”.
On Tuesday, the US military reaffirmed concerns about possible imminent threats from Iran to its troops in Iraq, although a senior British commander cast doubt on that and Tehran called it “psychological warfare”.
Donald Trump’s administration has stepped up sanctions pressure by ending waivers for some countries to purchase Iranian oil.
Iraq’s prime minister, Adel Abdul Mahdi, said on Tuesday he was getting indications from talks with both the US and Iran that “things will end well” despite the rhetoric.
A state department spokesman said the decision to withdraw non-emergency staff was based on a security assessment, but would not give details on how many personnel were leaving.
“Ensuring the safety of US government personnel and citizens is our highest priority and we are confident in the Iraqi security services’ (ability) to protect us,” he said.
“But this threat is serious and we want to reduce the risk of harm.”(Sky News)