Iraqis were furious when charges against the guards were thrown out
Iraq has ordered 250 former and current staff of US security firm Blackwater to leave within a week, a minister says.
Interior Minister Jawad al-Bolani told the Associated Press news agency that all "concerned parties" were notified of the order three days ago.
It comes after a US judge last December threw out manslaughter charges against five Blackwater guards over the 2007 killing of 17 Iraqis in Baghdad.
The incident stoked anti-American sentiment in Iraq.
The activities of foreign security firms in Iraq have been curbed since then.
US Vice-President Joe Biden has said the US government will appeal against the court ruling.
"We want to turn the page. It was a painful experience, and we would like to go forward," Mr Bolani said.
Seventeen Iraqis were killed in the shooting in Baghdad's Nisoor Square in September 2007.
Iraq maintains the Blackwater guards fired without provocation. Blackwater said the firing followed an ambush on one of its convoys.
The US had rejected attempts for a trial in Iraq but charges in the US were thrown out when a judge ruled in December that the guards' constitutional rights had been violated and that the justice department had mishandled evidence.
Last month, Mr Biden said during a visit to Iraq that the dismissal of the Blackwater charges was just that and "not an acquittal".
Expressing "personal regret" over the incident, he said the US justice department would file its appeal against the court's decision next week.
In 2007, Blackwater - now known as Xe Services - was the largest of the US State Department's private security contractors working in Iraq.