The United Nations' refugee body has appealed for $60m (£30.8m, 45m euros) in emergency aid for those fleeing violence in Iraq.
A total of 1.7 million people have been displaced within Iraq
One in eight of Iraqis have now left their homes, with up to 50,000 people leaving each month, the UNHCR said.
It said the exodus was the largest long-term movement since the displacement of the Palestinians after the creation of Israel in 1948.
Syria, Jordan, Egypt and Lebanon are hosting most of the country's refugees.
IRAQIS FLEEING THEIR HOMES
In Syria: <1,000,000
In Jordan: <700,000
In Egypt: 20,000-80,000 (estimate)
In Lebanon: <40,000
Internally displaced: 1,700,000
"The longer this conflict goes on, the more difficult it becomes for the hundreds of thousands of people displaced," UNHCR head Antonio Guterres said.
The agency said that about 12% of Iraqis had fled their homes due to the violence that has spread through the country since the 2003 US-led invasion.
But it also said that many had left long before the current conflict began.
The UNHCR estimates that the number of Iraqis living beyond the country's borders as refugees stands at two million and a further 1.7 million live within the borders as displaced people.
But it warns the number of internally displaced - those forced to leave their homes but not the country - could reach 2.7 million by the end of the year.
Of those who have fled Iraq, the UNHCR estimates that up to one million Iraqis are living in Syria; up to 700,000 in neighbouring Jordan; between 20,000 and 80,000 in Egypt and up to 40,000 in Lebanon.
Many of these refugees live in conditions of acute poverty and the agency says that there is growing evidence of women turning to prostitution.
In Syria, for example, almost a third of Iraqi refugee children do not go to school.
The agency has also urged neighbouring countries who are hosting refugees to keep their borders open because Iraq's continuing violence will fuel further floods of refugees.
"Unremitting violence in Iraq will likely mean continued mass internal and external displacement affecting much of the surrounding region," Mr Guterres said.