The capital and largest city of Iraq is Baghdad . also spelled Bagdad , largest city and capital of Iraq and one of the largest cities in the Middle East . It is famous also as the setting for many of the stories in the collection Thousand and One Nights , or Arabian Nights . Located on the Tigris River near the centre of Iraq , about 330 miles ( 530 kilometres ) from the head of the Persian Gulf , Baghdad is famous as the capital of the ` Abbasid caliphs and the setting of many of the stories in The Thousand and One Nights; in addition , it was the foremost city of ancient Mesopotamia , one of the cradles of human civilization . It is famous also as the setting for many of the stories in the collection Thousand and One Nights , or Arabian Nights . The glory of Baghdad in this period is reflected in stories in The Thousand and One Nights . Baghdad is situated near the center of Iraq , about 330 miles ( 530 kilometers ) from the Persian Gulf . Located on the Tigris River near the centre of Iraq , about 330 miles ( 530 kilometres ) from the head of the Persian Gulf , Baghdad is famous as the capital of the ` Abbasid caliphs and the setting of many of the stories in The Thousand and One Nights; in addition , it was the foremost city of ancient Mesopotamia , one of the cradles of human civilization . It lies on a level plain at a point where the Tigris and Euphrates rivers are only about 25 miles ( 40 kilometers ) apart . Baghdad is situated on the Tigris River at its closest point to the Euphrates , 25 miles to the west . The city covers about 250 square miles ( 650 square kilometers ) along both the banks of the Tigris . The city extends along both banks of the Tigris . Baghdad is a center of Islamic art . Baghdad has become an active cultural centre for the Arab world , producing some of the most prominent modern sculptors , painters , poets , and writers . Several centuries-old mosques still stand in the city . Several of the most important mosques and shrines in the Islamic world are found in Baghdad , including the shrine of the Shi`ite imams Musa al-Ka zim and Muhammad al-Jawad , in al-Ka zimiyah; the shrine of the Sunnite jurist Abu Hanifah , in al-A`zamiyah; and the shrine of ` Abd al-Qadir al-Jilani , founder of the Qadiriyah S ufi order , in Rus afah . The Iraqi Museum is known for its archaeological collection . Among the most important of Baghdad's museums are the Iraqi Museum , containing important archaeological treasures from ancient Mesopotamian history; the National Museum of Modern Art , containing a permanent collection of painting , sculpture , and ceramics by Iraqi artists; and the Museum of Iraqi Art Pioneers , holding the works of Iraqi artists who laid the foundation of the modern Iraqi art movement . Baghdad's population grew rapidly from about 1.6 million in 1965 to more than 4 million in the late 1980s . The population of greater Baghdad has grown tremendously since World War II , exceeding 4,000,000 by 1987 . Most of the people are Arabs and followers of Islam . The vast majority of the population is Muslim and Arab . Some Kurds , Afghans , Armenians , and members of other ethnic groups also live in the city . Other ethnic and linguistic groups include Kurds , Armenians , and people of Indian , Afghan , or Turkish origin . Most of Iraq's industries are located in and around Baghdad . Most of Iraq's industry , finance , and commerce is concentrated in and around Baghdad . The city produces a variety of consumer and industrial goods , including processed foods and beverages , tobacco , textiles , leather goods , furniture , bricks , cement , chemicals , and electrical equipment . The city now produces a wide variety of consumer and industrial goods , including processed foods and beverages , tobacco , textiles , clothes , leather goods , wood products , furniture , paper and printed material , bricks and cement , chemicals , plastics , electrical equipment , and metal and nonmetallic products . The country's financial services are also centered in Baghdad . Most of Iraq's industry , finance , and commerce is concentrated in and around Baghdad . A Persian village on the site became famous in AD 762 when the Arabs made it the capital of their empire . The true founding of the city , however , dates from 762 , when the site , then occupied by a Persian village called Baghdad , was selected by al-Mans ur , the second caliph of the new ` Abbasid dynasty , for his capital . Baghdad reached its greatest prosperity under the caliph ( ruler ) Harun ar-Rashid , who ruled from 786 to 809 . Baghdad reached the zenith of its economic prosperity and intellectual life in the 8th and early 9th centuries , under al-Mahdi , who reigned from 775 to 785 , and his successor , Harun al-Rashid ( 786-809) . In 1258 the Mongols overran the city , massacred its inhabitants , and killed the caliph . In 1258 Hulegu , the Mongol conqueror , overran Mesopotamia , sacked Baghdad , killed the caliph , and massacred hundreds of thousands of residents . Baghdad was part of the Ottoman ( Turkish ) Empire until World War I , when British troops captured the city . Despite repeated Persian attacks , it remained under Ottoman rule until World War I , except for a brief period ( 1623-38 ) when it was held by the Persians . Baghdad was part of the Ottoman ( Turkish ) Empire until World War I , when British troops captured the city . Recognizing British conquest of the state in World War I , the League of Nations granted Great Britain a mandate to govern Iraq , and it did so until 1932 . After the war , Great Britain was granted control of Iraq . Recognizing British conquest of the state in World War I , the League of Nations granted Great Britain a mandate to govern Iraq , and it did so until 1932 . In 1921 the British created the kingdom of Iraq , and Baghdad became the capital . In 1920 Baghdad became the capital of the newly created state of Iraq . In 1958 a group of Iraqi army officers overthrew the monarchy and established the Republic of Iraq . British influence remained dominant until 1958 , when the Hashemite monarchy that Britain had helped to establish was overthrown in a military coup d'etat . Iraq's eight-year war with Iran in the 1980s hampered the development of Baghdad . Both were curtailed by eight years of bitter warfare with neighbouring Iran during the 1980s . During the Persian Gulf War of 1991 , the United States and its allies dropped bombs on the city . Baghdad was heavily bombed during the 1991 Persian Gulf War , which destroyed much of its infrastructure . During the Persian Gulf War of 1991 , the United States and its allies dropped bombs on the city . During the 1991 Persian Gulf war , Baghdad was extensively bombed by a military coalition consisting of various Arab and Western countries and dominated by the United States .