Wednesday's move, rare in the country's public sector, comes as the new government pledges to curb cronyism and corruption and restore basic public services hit by mismanagement and sabotage.
Ministry spokesman Assem Jihad said around 450 workers suspected of selling petrol on the black market were fired over the past few months.
"They stole petrol and were a main cause of the fuel crisis that has gripped Iraq," Jihad said by telephone from Baghdad.
He said the former employees mostly worked at the pump but included managers and private operators who leased stations from the state and sold fuel on the black market instead of at subsidised prices of around one cent a litre.
The Oil Ministry started a media campaign in recent months to turn public opinion against gangs who smuggled fuel outside Iraq and highlight successes in arresting them, especially in the south.
Special Iraqi security units have also been employed in the south, which accounts for 80% of Iraq's two million barrel a day output, to protect supply.
Post-war Iraq has been importing around $2 billion a year worth of petrol and other fuels to compensate for losses in domestic production as saboteurs attacked refineries and distribution systems, and smugglers stole petrol trucks and fuel from pipelines.
Oil Minister Thamir al-Ghadhban
started the anti-corruption drive
Shortages in the country, which has been lurching from one fuel crisis to the next, eased sharply in the past two months, although a rationing system is still in place and pipelines still come under sabotage, especially in the Sunni regions in the north, oil officials said.
"Destroying the black market and making progress against smugglers was key, otherwise no country could have coped with what we were going through," said a senior official, who declined to be named on security grounds.
A US State Department report said the crackdown, which was started by former oil minister Thamir al-Ghadhban, was part of efforts to clean up the oil industry, which was directly under the grip of Saddam Hussien before the war.
Ghadbhan has been holding handover meetings with Iraqi politician Ahmad Chalabi, who was appointed deputy prime minister and acting oil minister last week until a political deal is reached for a permanent replacement.
Ministry officials privately say Ibrahim Bahr al-Uloum, who headed the Oil Ministry for nine months after the US invasion in 2003, remained the strongest contender for the position, although he was not named as expected when the cabinet was sworn in on Tuesday.