The heads of the eight Football Associations that normally compete in the regional event agreed on Tuesday to switch the tournament to the Saudi Arabian city of Jeddah, citing incomplete infrastructure and a FIFA ban on Iraq hosting international matches because of security concerns.
Iraqi Prime Minister Nuri al-Maliki used his weekly televised speech on Wednesday to describe the snub as "prejudiced against the rights of the Iraqi people".
The withdrawal of the team for the tournament, which is due to be held at the end of 2014 or in early 2015, comes after Bahrain stepped into host this year's edition after Iraq were originally selected.
Iraq's Ministry of Youth and Sport said it was "extremely disappointed" at the latest switch, denouncing the decision as politically motivated but the AFC, led by Bahrain FA president Sheikh Salman Bin Ebrahim Al Khalifa, had little sympathy.
"It's the right of the Iraq Football Association to decide on the interest of their team, fans and other stakeholders. The government should not interfere in the football affairs," the AFC said in a statement on Thursday.
"Both FIFA and AFC do not tolerate any interference in football matters by the government or any other bodies and AFC would like to ask them to stay away in the interest of Iraqi football."
Iraq, 2007 Asian champions, have paid a heavy penalty for government interference before with world governing body FIFA banning them in 2009 after the Iraqi Olympic Committee disbanded the FA and government forces seized control of the FA offices.