Wolfowitz, one of the main architect's of the US-British March invasion, arrived in the capital on Sunday following a troop visit in Germany.
The Pentagon's second-in-command said flawed intelligence about Iraq's alleged weapons of mass destruction should be investigated.
Washington and London justified the war against Baghdad on grounds Iraq allegedly possessed chemical, biological and nuclear arms. But ten months into the war, no such weapons have been found.
Wolfowitz again defended the invasion, despite the fact that no arms have been discovered.
David Kay, the former chief inspector in Iraq, said last week he believes captured Iraqi President Saddam Hussein probably did not have the stockpiles of chemical and biological weapons that US President George Bush claimed as justification for the invasion.
Occupation forces come under
almost daily resistance attacks
"You have to make decisions based on the intelligence you have, not on the intelligence you can discover later," said Wolfowitz in Germany at the headquarters of the Army's 1st Infantry Division in Germany.
The division is preparing to ship out beginning next week for Iraq, where it will replace the 4th Infantry Division in the dangerous north-central part of the country.
Wolfowitz said he retains confidence in US intelligence agencies, despite their apparent mistakes about Iraq's alleged weapons programmes.
"You need to look into when you got it right, and when you got it wrong," Wolfowitz said.
His visit was not disclosed in advance for security reasons. He first visited Baghdad three months ago. During that trip, Wolfowitz's hotel came under heavy mortar attack.
US soldier dies
News of Wolfowitz's visit came as the military said a US soldier had died of injuries sustained in a bomb explosion late last month.
The death pushes to 250 occupation soldiers killed since Bush declared an end to major hostilities on 1 May.
Instability has continued to grip Iraq. In the northern city of Kirkuk, four Iraqi police were injured on Sunday when a grenade was thrown at their patrol.
Security forces are out in force amid fears of attacks coinciding with the al-Adha feast, a major Islamic holiday which began on Sunday.
An Iraqi Turkman party official was also shot dead and another died from his wounds on Sunday after an ambush near Kirkuk, said a police official.
The area around Kirkuk is a hotbed of ethnic discontent as
Kurds, Arabs and Turkmen vie for power in the region which boasts some of Iraq's greatest oil wealth.
An explosive device on Saturday killed three US soldiers
riding in a convoy southwest of Kirkuk, said a US military spokesman.