Iraq cancelled a ministerial visit and summoned Turkey's ambassador as it blamed Ankara for a drone strike that killed two high-ranking Iraqi officers on Tuesday.
Iraqi officials labelled the strike a "blatant Turkish drone attack" in the autonomous Kurdish region in northern Iraq, where Ankara has for weeks been raiding militant positions.
Two border guard battalion commanders and the driver of their vehicle were killed, the army said in a statement, marking the first Iraqi troop deaths since Turkey launched the cross-border operation in mid-June against Kurdistan Workers' Party (PKK) rebels.
Iraq's foreign ministry -- which had already summoned the Turkish envoy twice over the military action on its soil -- said the ambassador would this time be given "a letter of protest with strong words" rejecting such aggression.
The ministry also confirmed the Turkish defence minister would no longer be welcomed on Thursday.
Ihsan Chalabi, the mayor of nearby Sidakan in the north of Arbil province, told AFP that the drone strike in the Pradost region targeted "Iraqi border guard commanders while they were in meetings with PKK fighters".
Witnesses had reported clashes earlier in the day between PKK and Iraqi forces, and local sources said the drone strike targeted an emergency meeting called to try to calm the tension.
The Iraqi presidency earlier denounced "a dangerous violation of Iraqi sovereignty" and called on Ankara to "stop all its military operations" in the region.
At least five civilians have been killed since the start of the Turkish campaign.
Ankara has announced the death of two of its soldiers, and the PKK and its allies have reported the deaths of 10 fighters and supporters.
The PKK, which is blacklisted as a terrorist group by Ankara and its Western allies, has waged an insurgency against the Turkish state since 1984.
It has long used the rugged terrain of northern Iraq as a rear base to wage attacks on Turkey, which in turn had set up military positions inside Iraqi territory to fight them.
The Kurdish authorities, dominated by the Democratic Party of Kurdistan (KDP), see the PKK as rivals but have never been able to uproot them from their northern Iraqi bases.
Iraq sees Turkey's military presence in the Kurdish region as a violation of its sovereignty, but does not want to alienate Turkey, a major trading partner and regional heavyweight.