The prince was attending the Special Operations Forces Exhibition (Sofex) near Amman with Defence Minister Lord Bach to promote British companies.
Andrew Gilligan, of BBC Radio 4's Today programme, reported that as the prince was leaving the trade fair on Monday "about 10 Iraqis in Ba'ath Party uniforms executed a carefully planned strategic jostle into the royal party".
Gilligan said the Iraqis deliberately cut across the royal group of about 10 people and physically brushed against some of its members, although not the prince himself.
Gilligan said he heard an aide inform the Duke of York of the delegates' nationality, to which Andrew replied: "God, the Iraqis", and looked quickly in the opposite direction.
The Iraqi contingent, including one of Saddam Hussein's cousins, was one of the biggest of those looking to buy weapons, despite a United Nations embargo.
Royal equerry Major Rob Olney told Today that the prince was at the show "to promote British investment and trade here in the Middle East".
When asked if the prince had planned to meet the Iraqis, he replied: "No comment."
A Buckingham Palace spokesman said the prince had not been jostled by Iraqis as reported.
Sellers
A Ministry of Defence spokesman would not comment on the prince's incident, but added: ''Lord Bach didn't encounter any Iraqis and wasn't embarrassed in any way.''
The spokesman said the ministry had been informed that there would be no official Iraqi delegation.
About 50 British industrialists and 40 government employees are at Sofex to highlight the performance of British weapons, from night-sights to tanks.
The show opened on Monday and closes on Thursday.
Other sellers included Bulgaria and Russia, while buyers included Libya, Syria and Iran.
Lord Bach said of the Iraqi delegation: "Anyone can come and look, but I think looking won't help them very much. There is a United Nations resolution that embargoes defence exports to Iraq."
A spokesman for the Campaign Against the Arms Trade said Jordan had been identified as a route for Iraq to acquire weapons, so the British government "was supporting" an event that made it easier for Baghdad to break the embargo.
But Lord Bach said it was important for the UK to exhibit in the region.
"We have close relations with many of the Arab states and I am delighted that we do.
"They are a force for stability in this troubled region. Many of them are moving towards democracy in their own way, in their own time."