The deposits were found after exploration in Maysan province, in southern Iraq near the border with Iran, and could potentially make a significant addition to Baghdad's already substantial reserves.
"Exploration began in Maysan, south of (provincial capital) Amara" last year, oil ministry spokesman Assem Jihad told AFP.
"Today, it completed 100 percent and achieved a big success.
"The initial assessment from this discovery is about one billion barrels of oil," he said, adding: "It will increase production capacity for (state-owned) Maysan Oil Company."
Jihad said the state-owned oil exploration firm had been carrying out its first exploration work within Iraq in nearly three decades.
Iraq, which is highly dependent on oil sales for government revenue, has sought in recent years to dramatically ramp up production and exploration in order to help rebuild its conflict-battered economy and infrastructure.
The country has proven reserves of 143.1 billion barrels of oil and 3.2 trillion cubic metres (111.9 trillion cubic feet) of gas, both of which are among the largest in the world.