The new flag consists of a pale blue crescent on a white background and has a yellow strip between two lines of blue at the bottom. It will be raised over government buildings within days, spokesman Hamid al-Kafaai said on Monday.
"The white stands for peace and a new start for Iraq, whilst the crescent represents Islam," al-Kafaai said, adding the blue strips represented Iraq's main rivers, the Tigris and Euphrates, and the yellow represented its Kurdish population.
The old flag - red, white and black with three green stars, representing pan-Arab nationalism - had flown for more than 40 years, preceding Saddam, who was ousted by US-led occupation forces just over a year ago.
In January 1991 Saddam Hussein added the Arabic words "God is great" to the flag.
But not everyone is happy with the decision, with one council member saying that Iraq's leaders should wait for an elected government before changing the flag, the BBC reports.
"In my opinion, it should not be passed until we have a parliament," Mahmud Uthman is quoted as saying.
The red, white and green flag
has been used for over 40 years
"I think there are issues more important to concentrate on now than the changing of the flag."
Iraq's al-Sabah newspaper, which published the design in its print edition, said that the designer's name was Rifat al-Jadirji and that his design had been chosen out of more than 30 proposals.
The flag is to be officially unveiled later this week.