The Brazilian issued a statement on his official website accusing the country's governing body of an unspecified breach of contract and announcing his departure from the role.
The statement read: "I have told the international federation (FIFA) and the Iraqi federation that I consider my contract void due to the IFA's failure to comply with its conditions. I will give more details soon."
Iraq won 10 and lost only five of Zico's 21 games in charge. They lie third in Asia's World Cup qualifying Group B, firmly in the hunt for the second qualifying place behind runaway group leaders Japan.