A planned burning of the Quran in Stockholm was expected to go ahead on Thursday despite the Swedish embassy in Iraq being stormed in protest.
Activist Salwan Momika indicated that he would proceed with his second Quran-burning stunt in weeks after getting a protest permit in Sweden.
Mr Momika, who describes himself as being from Baghdad, also planned to set fire to the Iraqi flag outside the country's embassy in Stockholm.
Iraq warned it would cut diplomatic ties if a Quran is burned again. Swedish police maintain that they approve only gatherings and not what happens at them.
Mr Momika's permit allows a two-person protest outside the Iraqi embassy in Stockholm at lunchtime on Thursday.
But Sweden's stance has caused a backlash in the Muslim world, including in Iraq where hundreds of protesters stormed the embassy compound in Baghdad.
Witnesses said water cannon and electric batons were used to disperse protesters, while several lorries arrived to extinguish a fire lit in the embassy grounds.
Sweden summoned an Iraqi diplomat after the rally in Baghdad, which was called by supporters of Shiite cleric Moqtada Al Sadr.
Foreign Minister Tobias Billstrom said Iraqi authorities "have seriously failed" in their duty to protect diplomatic missions. He said Swedish staff were safe.
"What has happened is completely unacceptable and the government strongly condemns these attacks," Mr Billstrom said.
Iraq ordered security officials to "take all the necessary measures to identify the perpetrators of this act and hold them to account".
But Prime Minister Mohammed Shia Al Sudani's office said "any recurrence of the incident involving the burning of the Holy Quran on Swedish soil would necessitate severing diplomatic relations".
"Granting permission under the pretext of freedom of expression is viewed as provocative and contrary to international covenants and norms, which emphasise respect for religions and beliefs. Such actions are deemed a threat to peace and encourage a culture of violence and hatred," the statement said.
Protests have taken place in several Muslim countries during a string of provocative incidents in Sweden. Mr Momika burnt a Quran outside Stockholm's main mosque on June 28. Far-right figure Rasmus Paludan did the same at Turkey's embassy in Sweden in January.
A permit was granted last week to an activist who said he intended to burn the Torah, but he ultimately chose not to do so.
A rabbi in Sweden said he believed appeals for calm by the Muslim community had prevented the Torah being set on fire.
The UN's human rights council this month passed a Pakistan-led motion calling for people who desecrate holy texts to be held to account.
Western powers voted against it, but Sweden has said it is considering changing the law after courts ruled the protests were protected by freedom of expression.
The EU has condemned the burning of the Quran but says it is up to individual states to decide whether to punish such acts.
