In a letter sent to the Iraq Football Association, FIFA raised concerns over security conditions and a breach of safety regulations their qualifier with Jordan earlier this month, according to an AFC statement.
The letter added that the country will have to nominate a neutral ground in Asia for the World Cup qualifying matches by October 1 and the 2012 Olympic qualifiers by October 3.
The venue must not be one of the countries where Iraq is scheduled to play qualifiers, however.
Iraq, ranked 109 in the FIFA world rankings, lost 2-0 to Jordan on September 2 at the Franso Hariri Stadium, which appeared well over capacity and suffered a power cut during the match.
The gulf nation are currently placed third in Group A of the Asian qualifiers for the 2014 World Cup alongside Jordan, China and Singapore.