There were no victims in the blast, which struck late on Wednesday, with only material damage to the second floor of the embassy, it said.
The attack, at around 11.30pm (2030 GMT), came two weeks after a truck stuffed with explosives blew up at Nasiriyah in southern Iraq killing 28 people including 19 Italians.
On the day of the Nasiriyah bombing the Italian intelligence service had been warned of a possible attack, but on the embassy.
Five days ago two homemade rocket launchers mounted on donkey carts were found in streets near the Italian embassy in Baghdad.
The Italian government of Prime Minister Silvio Berlusconi is one of US President George Bush's most faithful European allies.