The emergency rule was first imposed for 60 days in November before a major assault on Falluja.
It gives Allawi special powers to impose curfews, close borders and airports and detain suspects without following normal legal procedures.
"Since terrorist gangs continue their activities to prevent the creation of a broad representative government and try to impede peaceful political participation of all Iraqis, we have decided to extend the state of emergency in all areas of Iraq, except the region of Kurdistan, for 30 days," Allawi said in a statement on Thursday.
National Assembly elections
Iraqis are due to elect a 275-seat National Assembly in three weeks that will draft a constitution and appoint a government, but daily attacks have raised fears that many Iraqis will be too scared to cast their ballots.
On the other hand, Iraq's Sunni community has been increasingly marginalised since the US-led invasion, and some politicians have called for the poll to be postponed on the grounds that the violence would deter Sunnis from voting.
Some Sunni clerics have been
calling for boycotting the polls
But US and Iraqi officials say they are determined to hold the poll on time despite the dangers. Iraq's main Sunni political group, the Iraqi Islamic Party, has withdrawn from the race, saying lopsided voting and poor voter awareness would undermine the credibility of a 30 January poll.
An influential group of Sunni clerics has also called on Iraqis to boycott the poll entirely over US-led attacks on Sunni areas in the north and west where fighting is raging.