Doing away with the curfew -- which most recently was in effect from midnight to 5:00 am -- ends a longstanding policy aimed at curbing violence in the capital by limiting movement at night.
The curfew, in place since the aftermath of the US-led invasion of 2003, did little to curb the deadly bombings that plague the capital, which are carried out during the day or early evening with the aim of causing maximum casualties.
Signup to our newsletter and follow us on Facebook and Twitter!
The hours the curfew has been in force have varied over the years, and it has been lifted completely before only to be reinstated again.
Illustrating the persistent danger of violence in Baghdad, bombings in the capital killed at least 32 people and wounded more than 70 on Saturday.
The decision to lift the curfew comes as Iraqi forces battle to regain ground from the Islamic State (IS) jihadist group, which spearheaded an offensive that overran large areas north and west of Baghdad last June.
Abadi ordered the move this week, a decision his office said was taken so there would "be normal life as much as possible, despite the existence of a state of war".