The military said they suspected the man of "involvement in facilitating Iranian weapons shipments into Iraq" under the cover of working for an organisation involved in the restoration of Iraqi religious sites.
The man is alleged to have used the organisation as a front in order to bring weapons into Iraq concealed in shipments of building materials, the military said in a statement released late Tuesday.
The US military has long accused Iran's Quds Force of arming, training, and funding Iraqi militiamen to stoke the sectarian violence that has convulsed the country since the 2003 US-led invasion, charges Tehran has denied.
The statement also said the man was carrying an "unspecified amount" of cocaine.
The arrest came as Iraq's parliament was mulling a wide-ranging security pact with the United States that would require all US troops to leave Iraq by the end of 2011, a pact that Iran has vehemently opposed.
