Hasan Kazemi Qomi presented his credentials to Jalal Talabani, the Iraqi president, in Baghdad on Tuesday night, the Islamic Republic News Agency reported.
The move indicates an improvement in official Iran-Iraq relations, which have been at the level of charge d'affaires since ambassadors were withdrawn shortly before the Iran-Iraq war of 1980-88.
According to IRNA, Talabani told Qomi: "Upgrading the level of relations between the two countries will open a new page in the history of ties between the two countries."
Qomi said Iran was ready to particpate in the reconstruction of Iraq, IRNA reported.
Talabani also lauded Iran for hosting thousands of Iraqis who fled the country during the presidency of Saddam Hussein, IRNA reported.
The Iraqi government has accused Iran of sending agents and money into the country to stir up fighting on behalf of pro-Iranian Shia factions.
Iran has denied interfering, but last month Iran fired artillery shells at alleged Kurdish rebels inside Iraq.
"Iraq lives in an ordeal now, and we have to extend our full support to it and to its elected government"
Hassan Kazemi Qomi,
Iranian ambassador to Iraq
The Kurdish provinces of northern Iraq form the country's most stable and prosperous region.
But neighbouring Iran and Turkey, which have large Kurdish minorities, view the region as a source of inspiration and support for Kurds seeking secession.
Iran has deployed troops, tanks and artillery to seal off its Iraqi border, a move of concern to Baghdad, as Talabani has repeatedly expressed.
In a statement posted on Talabani's presidential website on Wednesday, Qomi denied allegations that Iranian troops had crossed into Iraq.
"Iraq lives in an ordeal now, and we have to extend our full support to it and to its elected government," Qomi was quoted as saying on the site.
"Iraq's security is part of the security of its neighbours, and an unstable Iraq will be a haven for terrorists," Qomi said.
High level US and Iranian officials are expected to meet in Baghdad to discuss the security situation in Iraq.
As the Iranian ambassador, Qomi is likely to participate in the talks, for which a date has not been scheduled.
US officials have said the meeting will focus on Iraq and will not get involved in other matters such as Iran's nuclear dispute with the UN Security Council.