Making the announcement on Thursday, Jawad Bolani, the interior minister, said: "We have sent an order to 250 former Blackwater employees, who today are working with other security companies in Iraq, to leave the country in seven days and we have confiscated their residence permits.
"All of those concerned were notified four days ago and so they have three days to leave. This decision was made in connection with the crime that took place at Nisur Square."
Bolani was referring to an incident at the busy Baghdad square in September 2007, when five guards employed by Blackwater were accused of killing 14 unarmed Iraqis in a gun and grenade attack, and wounding 18 others.
In another development, the Washington Post newspaper reported on Thursday that a husband and wife who once worked for Blackwater said - in newly unsealed court records - that they had personal knowledge of the company falsifying invoices, double-billing federal agencies and charging the government for personal and inappropriate items whose real purpose was hidden.
The paper quoted the couple as saying they witnessed "systematic" fraud on the company's security contracts with the state department in Iraq and Afghanistan, and with the homeland security department and the Federal Emergency Management Agency in Louisiana after Hurricane Katrina.
Brad and Melan Davis worked in various Blackwater locations.
Brad Davis, a former marine, served as a team leader and security guard, including in Iraq.
His wife, Melan Davis, worked as a finance and payroll employee, starting in Louisiana.
They have filed their allegations that Blackwater defrauded the government as part of a false claims lawsuit, which allows whistleblowers to win a portion of any public money that the government recovers as a result of the information.
The Davises said that Blackwater officials kept a Filipino prostitute on the company payroll for a state department contract in Afghanistan, and billed the government for her time working for Blackwater male employees in Kabul.
The alleged prostitute's salary was categorised as part of the company's "Morale Welfare Recreation" expenses, they said.
Melan Davis said that while working in Blackwater's finance department, she questioned how Blackwater could bill the government for its workers' travel expenses to and from Iraq when it lacked the documentation for those trips.
She said in court papers that she later travelled to a hotel in Amman, Jordan, where Blackwater personnel were often housed en route to Iraq.
She said that while there, she and two co-workers spent numerous hours generating reams of false invoices for plane travel at inflated rates, so that her Blackwater bosses could overcharge the government for the travel.
Melan Davis argues that Blackwater terminated her in February 2008 as a result of her questioning fraudulent billing. Brad Davis resigned