Substitute Mohanad Ali, who plays in the UAE for Dibba, and Amir Al-Ammari scored in Basra as Graham Arnold's men came from behind to secure a 3-2 aggregate victory after last week's 1-1 first-leg draw.
Iraq, whose only appearance at a World Cup was a group-stage exit in Mexico in 1986, progressed to the six-team Play-Off Tournament, where the last two tickets to the finals will be decided.
The UAE broke the deadlock in the 52nd minute, as Yahia Nader slipped the ball through for Brazilian-born forward Caio Lucas to fire the ball past Iraq goalkeeper Jalal Hachim.
However, Iraq then hit back midway through the second half when Mohanad Ali headed home Al-Ammari's free-kick.
The home side piled on the pressure late on, with Mohanad Ali missing two good chances to score a winner.
VAR then awarded Iraq the latest of penalties for a handball, and Al-Ammari stepped up to net the spot-kick and keep alive his nation's hopes of ending their 40-year wait to play in a World Cup.
Bolivia, New Caledonia and the Democratic Republic of Congo have also booked their places at the Play-Off Tournament. The other two spots will be decided by the final round of CONCACAF qualifiers later Tuesday, with Jamaica and Panama currently in position to qualify.
