Authorities in Najaf, southern Iran, declared a curfew after a group of protesters breached the Iranian consulate and started a fire on Wednesday evening.
Consulate staff had evacuated before the breach, police and civil defense sources said. However, the AP news agency cited a police official as saying that one person was killed and at least 35 wounded when police fired live rounds into the crowd.
Protesters managed to enter the compound and replace the Iranian flag with an Iraqi one.
Iraq has faced deadly anti-government protests for nearly two months, with more than 300 people losing their lives.
Protesters are frustrated by a range issues, including wide-spread corruption and a lack of jobs, but they also accuse the government of being under the influence of foreign powers, particularly Iran. Tehran-backed parties are the dominant force in the Iraqi parliament.
Read more: Is the Middle East seeing a new Arab spring?
In Baghdad, protesters were occupying three central bridges Jumhuriya, Ahrar and Sinar. Major roads have also been blocked in various parts of the country.
dj/aw (AP, Reuters)