Interim Justice Minister Hashim al-Shibli said the Australian government has advised its citizens not to travel to Iraq and asylum seekers should be given the same advice.
"Until we have the capability for receiving these people and providing them with housing, they should stay where they are for a few more months," al-Shibli told the Australian Broadcasting Corporation from Iraq.
"The situation at the moment is very complicated. Too dangerous."
Basim al-Majidi, a lawyer with Iraq's new Ministry of Human Rights, agreed that the situation was too risky for asylum seekers to return home.
"Iraq is their homeland and they will be welcomed, but now is not the right time because of the security situation," he told ABC radio.
"We call on the Australian government to keep them there safely until the situation is right for them to come back."
Australian Immigration Minsiter Amanda Vanstone said the government was not encouraging people to return to Iraq.
The foreign affairs' department website says the security situation in Iraq remains "extremely hazardous, as underscored by terrorist bombings and other attacks against civilians in recent months".
"Foreigners in Iraq are at significant risk of being targeted or indirectly involved in terrorist and other attacks.
"Acts of criminal lawlessness, including car-jackings, use of fire-arms and explosives and incidents of civil unrest pose significant threats to security throughout Iraq," the website says.
Australia has a tough immigration policy and all illegal entries and those overstaying their visas are detained at fenced camps while their applications for asylum are processed.
Australia contributed some 2,000 troops to the military campaign in Iraq although no Australians have been among the casualties in Iraq.