Baghdad Burning by the university graduate, who uses the pen name Riverbend, is longlisted for the £30,000 ($52,000) Samuel Johnson prize - the world's richest for non-fiction.
She is up against 18 other books out of 168 entries.
Among fellow nominees are Alan Bennett and his offering Untold Stories.
Using the internet as her outlet, the Iraqi author, who says she is in her late twenties, chronicles her anger and fear during "three years of occupation and bloodshed" in Baghdad.
She also calls for the withdrawal of US troops from Iraq.
Riverbend began the blog on 17 August 2003. She wrote: "I'm female, Iraqi and 24. I survived the war. That's all you need to know. It's all that matters these days anyway."
"Spring should be about renewal and rebirth. For Iraqis, spring has been about reliving painful memories and preparing for future disasters. In many ways, this year is like 2003 prior to the war when we were stocking up on fuel, water ... We're doing it again this year but now we don't discuss what we're stocking up for. Bombs and B-52s are so much easier to face than other possibilities"
Excerpt from Baghdad Burning
She said she worked as a computer programmer before the invasion but then lost her job because it became too dangerous for women to travel to and from their workplace alone in an increasingly lawless society.
Small literary publisher Marion Boyars bought Baghdad Burning last year, classifying it under the genre of biography and memoir.
The publishing house has said it knows Riverbend's identity but respects her wish to remain anonymous.
The winner of the literary award will be announced at a dinner at the Savoy Hotel in London on 14 June.