Up to half of the refugees are being sheltered by Syria and Jordan, which say they are struggling to shoulder the burden.
UN agencies say they have been driven out by violence, poor services, losing their jobs and facing an uncertain future.
"The security concerns of these countries does not justify treating Iraqis in such a humiliating manner"
Mohammad al-Haj Hamoud, Iraq's deputy foreign minister
Nearly 2 million are internally displaced across Iraq.
Hamoud, who appealed for more donor aid, said host countries should help refugees to cope better with difficult living conditions and meagre incomes by giving them access to public schools and medical centres.
Hamoud said efforts to stem the flow of refugees by Jordan and to a lesser extent Syria, who now impose tougher entry restrictions and residency conditions, resulted in many cases of mistreatment at border crossings.
He said Iraqis holding legitimate passports and visas underwent humiliating detention at airports for days before being deported without any justification.
Syria hosts around 1.2 million Iraqis, a number equal to 12 per cent of its own population, and says it needs $256 million to maintain aid, health care and education over the next two years.
Jordan says the 750,000 Iraqi refugees inside its borders cost it $1 billion a year, stretching the resources of a country of just 5.6 million.
But Hamoud said turning away Iraqi families who risked their lives making the journey through volatile areas to reach safety was "contrary to the most basic humanitarian rules".
There was no immediate comment from either Jordan or Syria. However, both countries say they are doing the best they can to accommodate the refugees, but need more help from Iraq and the international community.
"We urge our neighbours to grant residency permits to Iraqis who entered and allow them to stay until the right conditions arise for their return," Hamoud said.
"The security concerns of these countries does not justify treating Iraqis in such a humiliating manner."