Harry Thomas, state department human resources director, said: "We have all taken an oath to serve our country and so if someone decides they do not want to go, then we would then consider appropriate actions. We have many options, including dismissal from the foreign service."
On Thursday, Thomas returned from a visit to Iraq where he was assessing staffing needs for next year.
Privately, many US diplomats say they fear being posted to Iraq because of the risks of working in a war zone.
In addition, it is an "unaccompanied" posting, meaning children and a spouse cannot join the diplomat because of the dangers involved.
Thomas said the state department had made "directed" assignments before, such as in 1969 when an entire junior foreign officer class was sent to Vietnam and again in the 1970s and 1980s for some difficult African postings.
"This is not unique. Foreign service officers have always volunteered for their country," he said.
There are currently about 200 US diplomats in Iraq who serve on a one-year basis and the staffing would need to rise to about 250 for next summer, he said.
Thomas said about 1,200 state department employees have already served in Iraq since the US invasion in March 2003.
He said there was an attractive financial package for those serving in Iraq as well as five recreational breaks during the posting.
He did not believe the move would discourage people from joining the foreign service.
"After Google and Disney, we are the most popular place for people to work," Thomas said, referring to a recent survey that ranked the state department amongst the top five organisations to work for.