"I would urge that the somewhat frenzied media activity surrounding this particular story should cease in the interests of the overall security of all our people deployed in Iraq," Dannatt said.
Clarence House, Prince Charles' London office, would not comment on Dannatt's statement.
Harry, a second lieutenant, is a tank commander trained to lead a 12-man team in four armoured reconnaissance vehicles.
If deployed, he would become the first royal to serve in a war zone since his uncle, Prince Andrew, flew as a helicopter pilot in the Falklands war against Argentina in 1982.
The defence ministry has said the prince could be kept out of situations where his presence could jeopardise his comrades.
Iraqi fighters have threatened to kill or kidnap the 22-year-old prince, including claims his photograph had been widely circulated among fighters.
Military leaders accept that the third in line to the throne would be an attractive target for fighters and that his presence could lead to a surge in attacks on British forces.
After graduating from the Royal Military Academy at Sandhurst last year, the younger son of Prince Charles and the late Princess Diana said he wanted an opportunity to serve his country.