Officials expect the flight to usher in a revival of domestic air travel in Iraq, which had its air traffic grossly disrupted by no-fly zones imposed by the US and UK in parts of the country following the first Gulf war.
The Iraqi national carrier had flown a plane from Amman, Jordan to Baghdad in September 2004, but without any passengers, in a symbolic resumption of its international flights after a gap of 14 years.
Iraqi Airways was formed in 1946. After Iraq's invasion of Kuwait in 1990, UN sanctions imposed an economic embargo in 1991 that left the airline in ruins.
The sanctions forced the airline to turn to maintenance work on other international planes to avoid falling into bankruptcy.
"We were not allowed to fly. We turned our offices into business centres and we turned to contractual work in Libya, Jordan and Sudan," said Isac Esho, the airline's deputy director general.
Fifteen of its planes were flown out of the country, where they were left to rust. The airline says the planes are "non-functioning" and says it will send out repair teams.