Hundreds of people demonstrated in the holy Shiite city of Karbala and some leaders urged the government to close down the newly reopened Saudi embassy in Baghdad.
Nimr al-Nimr, a driving force of protests that broke out in 2011 in the Sunni-ruled kingdom's east, was among 47 people executed in Saudi Arabia.
The office of Hadi al-Mudaressi, an Iraqi cleric whose brother has a strong following among Bahraini Shiites notably, organised a protest near the mausoleum of Imam Hussein in Karbala.
"No red lines from now on", "We will reap your souls, Saud and Khalifah", read some of the banners, referring to the Saudi and Bahraini ruling families.
"This is what I tell Al-Saud from the sacred land of Hussein: I swear to God that the sheikh's blood was not spilled in vain," said Said Saad al-Mussawi, one of the protesters.
"We will make the earth shake under your feet," he said.
Sheikh Ibrahim al-Ashtari, from Mudaressi's office, said he wanted "the Iraqi government to take a clear and honest position regarding this major tragedy."
A cleric from Bahrain who was at the protest, Sheikh Habib al-Jamri, said the world should react to Nimr's execution.
"Sheikh Nimr was an icon for Islamic resistance," he told AFP.
"His words were his weapon. They couldn't defeat his words so they detained him, tortured him and today executed him in front the world's eyes, like a challenge to global conscience."
Prime Minister Haider al-Abadi expressed "great shock" and warned of the destabilising potential of Nimr's execution.
"Freedom of speech and peaceful opposition are basic human rights granted by divine and international laws. Violating them impacts the region's security, stability and social fabric," he said in a statement.
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Several Sunni clerics also condemned Nimr's execution, which looked likely to strain a recent attempt at diplomatic rapprochement between the two countries.
- Diplomatic tension -
Khalaf Abdelsamad, who heads the parliamentary bloc of Iraq's Shiite Dawa party -- to which both Abadi and his predecessor Nuri al-Maliki belong -- also said Baghdad should take action.
"Abdelsamad urges the Iraqi government to close down the Saudi embassy, expel the ambassador and execute all Saudi terrorists in Iraqi prisons," a statement from his office said.
The embassy only just reopened on December 15, a quarter of a century after relations were broken over Iraq's invasion of Kuwait. The ambassador himself has only been in the country three days.
A justice ministry spokesman said 61 Saudis were detained in Iraqi prisons six months ago. He could not immediately provide a recent figure.
"The execution of Sheikh al-Nimr will have serious consequences and bring about the end of the Al-Saud (royal family's) rule," Abdelsamad's office said.
Asaib Ahl al-Haq, one of the most powerful Shiite militias in the country, reacted with similar demands.
Abu Mahdi al-Mohandis, a top leader in the powerful Hashed al-Shaabi (Popular Mobilisation) paramilitary group that is dominated by Tehran-backed militias, condemned Nimr's execution.
"Even as the rulers of Saudi Arabia are supporting terror in the entire world by sending takfiris, weapons and car bombs to Muslim countries, today they executed the most honest man in Saudi Arabia," he said in a statement.
Takfir is a part of the ideology of some extremist Sunni groups -- such as the Islamic State group that controls parts of Iraq and Syria -- that considers other Muslims infidels.
Mohandis has close ties with Tehran, which reacted by warning Saudi Arabia that it would pay a "high price".
"The Saudi government supports terrorist movements and extremists, but confronts domestic critics with oppression and execution," an Iranian foreign ministry spokesman said.
Saudi Arabia executed more than 150 people in 2015.