"We caution against the risky repercussions of this decision on the stability of the region and the world", an Iraqi government statement said.
Iraqi Foreign Ministry spokesperson Ahmad Mahjoub announced that the ministry has summoned the USA ambassador in Baghdad, Douglas Silliman, and handed him a memo protesting the decision by Trump.
There are more than 5,000 U.S. troops in Iraq, part of an global coalition providing air and ground support in Iraqi forces' fight against Islamic State militants.
In a statement, Al-Abadi warned on the repercussions this measure will have on the stability in the region and the world.
According to the Associated Press's longtime diplomatic correspondent, this is the first time such a warning has been released over a policy decision since 2003, when the Iraq War began.
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. The president admitted the move will cause dissent, but says it could help resolve the Arab-Israeli conflict.
He did say that the Palestinian protests are concerning, but said that once emotions die down he believes there will be a better chance to negotiate between the Israelis and the Palestinians.
For that reason, he reiterated what was established on June 4, 1967, with the restoration of an independent Palestinian state with Jerusalem as its capital.