Iraq's Communications and Media Commission (CMC) sent the Al-Jazeera Media Network a letter informing it of a March 24 decision to withdraw the bureau's licence and close its office for one year.
The letter cited "your continuing violations and offences and persistent media discourse instigating violence and sectarianism."
In a statement issued Wednesday, the Doha-based news network, one of the largest in the region, said that it had not violated regulations or deviated from professional and objective coverage.
Al-Jazeera has repeatedly come under fire from the Iraqi authorities for coverage perceived as too friendly to the Islamic State jihadist group and hostile to the country's Shiite majority.
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The network's foreign staff were already unable to enter Iraq because the authorities had made it difficult for them to obtain visas, the network's Iraqi bureau chief Walid Ibrahim told AFP.
The CMC's decision contradicts the Iraqi government's "commitment to guarantee freedom of expression", Al-Jazeera said.
Ziad Ajili, from the Journalistic Freedoms Observatory, condemned the move, saying that the CMC does not have direct authority to close media offices in Iraq.
Iraqi leaders have accused Gulf monarchies of not doing enough to fight IS jihadists and in some cases of directly supporting them.
Qatar is accused by many in Iraq of having intentionally sponsored hardline Sunni groups to counter the expanding influence of Iran and Shiite Islam in the region.