Iran's Revolutionary Guards force says it targeted an Israeli "strategic centre" with missiles that struck the Iraqi Kurdish city of Irbil overnight.
Twelve missiles hit areas around the US consulate overnight, causing material damage and wounding one civilian, the Kurdistan Regional Government said.
The US said no Americans were hurt and that its facilities were not damaged in what it called the "outrageous attack".
Israel's military and government declined to comment on Iran's claim.
But Kurdish officials accused the Revolutionary Guards of seeking to use "baseless" propaganda to justify targeting civilian locations.
Taxi driver Ziryan Wazir said he was in his car near the US consulate when the missiles struck at around 01:00 on Sunday (23:00 GMT on Saturday).
"I saw a lot of dust, then I heard a very loud noise. The windows of my car exploded and I was injured in the face," he told AFP news agency.
A local television channel, Kurdistan24, posted images of damage to its offices caused by the blasts.
Iranian state media cited a Revolutionary Guards statement as saying the force had targeted "the Zionists' strategic centre of plotting and evil" in Irbil with precision-guided missiles in response to "recent crimes".
The Revolutionary Guards had vowed to make Israel "pay" for an air strike near the Syrian capital Damascus on Monday that killed two senior Iranian officers.
The Kurdistan Region's Council of Ministers said: "This cowardly attack on Irbil... allegedly under the pretext of hitting an Israeli base near the US Consulate in Irbil, targeted civilian locations and its justification is only to hide the disgracefulness of such offence."
"We reiterate that the propaganda of the perpetrators of this attack is far from true."
Iraqi Prime Minister Mustafa Kadhimi also condemned the attack.
"The aggression which targeted the dear city of Irbil and spread fear amongst its inhabitants is an attack on the security of our people," he tweeted.
"Our security forces will investigate and stand firm against any threats towards our people."
The US ambassador to Iraq, Matthew Tueller, said that Iran "must be held accountable for this flagrant violation of Iraqi sovereignty and for terrorist attacks on innocent civilian properties".