"We caution against the unsafe repercussions of this decision on the stability of the region and the world", an Iraqi government statement said.
The US, which is leading a large-scale operation against Islamic State (IS, formerly ISIS) in Iraq, has about 5,200 troops in the country, according to the latest statement from the US Defense Department.
It fights under the umbrella of the Popular Mobilisation Forces (PMF), a mostly Iranian-backed coalition of Shia militias that played a role in the battle against IS.
In November, Ted Poe from the US House of Representatives proposed imposing "terrorism-related sanctions" on Nujaba. The bill claims Kaabi took part in "multiple mortar and rocket attacks" on the Green Zone in Baghdad in 2008.
Prime Minister Haidar al-Abadi has confirmed today Iraqi government " s rejection of US decision to recognize Jerusalem or al-Quds as the capital of Israel and move Washington " s embassy to that city in violation of worldwide resolutions and accords.
Trump's defiant move - fulfilling a pledge made during his 2016 presidential campaign - ends seven decades of USA ambiguity on the status of the Holy City, which is vociferously claimed by both Israelis and Palestinians.
While the Trump administration and Israel's prime minister framed the decision as a step toward peace, Arab leaders warned it could have disastrous consequences for regional stability.
On Thursday, the Iraqi government demanded the United States reverse its decision to recognize Jerusalem as Israel's capital.
"We caution against the risky repercussions of this decision on the stability of the region and the world", an Iraqi government statement said.
Al-Abadi called on the USA government to reverse that decision, because it can lead to an escalation of extremism and atmosphere conducive to terrorism around the world.