Baghdad has also recalled its charge d'affaires in Sweden, a government statement said.
The decision came after Iraq told Sweden it would sever diplomatic ties if a Quran is burned again, after hundreds of people stormed the Swedish embassy in Baghdad and set it alight in a protest.
Prime Minister Mohammed Shia al-Sudani had led an emergency meeting hours after the violent unrest which saw hundreds of protesters breach the Swedish compound, set fire to buildings and clash with riot police.
The Iraqi government strongly condemned the embassy attack but also issued a warning to Sweden if it allows the second Quran-burning protest within less than a month to go ahead as scheduled later in the day.
Baghdad had informed Stockholm "that any recurrence of the incident involving the burning of the Holy Quran on Swedish soil would necessitate severing diplomatic relations," said a statement from Sudani's office.
"Granting permission under the pretext of freedom of expression is viewed as provocative and contrary to international covenants and norms, which emphasize respect for religions and beliefs. Such actions are deemed a threat to peace and encourage a culture of violence and hatred."
On June 28, Sweden-based Iraqi refugee Salwan Momika had also burnt pages of the Quran, outside a Stockholm mosque, sparking a wave of indignation and anger across the Muslim world.
Momika on Facebook confirmed Swedish media reports that he was one of the organizers of the planned event, where they were also planning to burn the Iraqi flag.