Iran's ambassador to Iraq denied on Wednesday that Iranian troops had crossed the border to pursue Kurdish rebels.

On Wednesday, Iraq's semi-autonomous Kurdistan region demanded the central government in Baghdad take steps against an incursion into its territory by Iranian forces.

A Reuters witness saw Iranian soldiers manning a small position some two kilometres (1.2 miles) inside Iraqi Kurdistan.

In a report by Iran's semi-official Mehr news agency, Ambassador Hassan Kazemi-Qomi denied such military manoeuvres.

"The report of Iranian troops entering Iraqi territory is not true, it is baseless," he was quoted as saying.

Kazemi-Qomi blamed certain Arab media for what he called propaganda aimed at hurting relations between Iran and Iraq.

The two fought an eight-year war in the 1980s but relations have improved between the majority Shi'ite countries since the overthrow of Iraqi Sunni dictator Saddam Hussein in 2003.

Iranian forces frequently clash with rebels from the Party of Free Life of Kurdistan (PJAK), an offshoot of the Kurdistan Workers Party (PKK) which took up arms in 1984 for an ethnic homeland in southeast Turkey.

Iran considers the PJAK a terrorist group.

Like Iraq, Turkey and Syria, Iran has a large Kurdish minority, living mainly in the Islamic Republic's northwest and west. – Reuters