The move followed reports that entry visas for Italy and the rest of the Schengen border-free zone that covers most of continental Europe were being sold for up to €10,000 ($10,600) a time to buyers deemed a security risk by other European consulates in the region's capital, Erbil.
A ministry investigation identified irregularities in the visa issuing procedures at the consulate and the official in charge of the section has been replaced, the ministry said in a statement.
Italian daily Corriere della Sera reported that at least 152 visas had been issued in return for illicit payments. Around half went to Kurdish locals and the rest to other Iraqi nationals or Syrian refugees, the daily said.