President Xi Jinping and Iraqi Prime Minister Haider al-Abadi announced the decision when they met at the Great Hall of the People in Beijing.
Xi also said China supports measures taken by Iraq to protect national security and stability.
Chinese president Xi Jinping (R) meets with Iraqi Prime Minister Haider al-Abadi in Beijing, capital of China, Dec 22, 2015.
After the meeting, Premier Li Keqiang said in his meeting with the Iraqi visitor, "China is willing to expand energy cooperation with Iraq and actively participate in oilfield exploitation and refinery buildup."
He said China expects to form a long-term and stable energy cooperation partnership with Iraq, covering the entire energy production chain.
Li and al-Abadi later witnessed the signing of an energy cooperation agreement and other documents.
Vice-Foreign Minister Zhang Ming said the two premiers discussed the possibility of using Chinese-made facilities and equipment in Iraq's gas and oil exploitation and reached an agreement on this.
The Wall Street Journal reported on Monday that Iraq is in talks to form an oil-marketing venture with China's largest refiner China Petrochemical Corp, better known as Sinopec Group, amid the oil price slump.
Zhu Weilie, director of the center for China-Arab States Cooperation Forum Studies, said, "Given the weak energy price, it is a good choice for Iraq to strengthen cooperation with a big importer such as China."
Premier Li also said on Tuesday that China is willing to carry out production capacity cooperation in fields including cement and steel to raise Iraq's producing capacity.
Zhang Yunbi contributed to this story.
