said on Friday it had begun taking steps to "bring Blackwater to justice" over the deaths of 14 civilians in 2007, one of the bloodiest incidents involving a private security firm in the country.
A US court decision on Thursday to drop charges against five Blackwater security guards accused of the deaths has unleashed anger in Baghdad.
Human Rights Minister Wejdan Mikhail had told AFP she was "astonished" by the decision to dismiss the criminal charges against the guards.
"There was so much work done to prosecute these people and to take this case into court and I don't understand why the judge took this decision," she said.
Government spokesman Ali al-Dabbagh said "the Iraqi government has started to take the necessary measures to bring Blackwater to justice for the killing of 17 Iraqi citizens."
He also called in his statement for the US Justice Department to appeal the decision.
Asked later by state-funded broadcaster Al-Iraqiya what specific measures were being taken, he replied: "We will use all possible means and our relations with the United States to prosecute the criminals from this company (because) a real crime has been committed.
"The Iraqi government has put all of its institutions to work. ... We will not forget the victims' blood."
Earlier, Dabbagh said an Iraqi investigation had shown that the guards were responsible for the deaths of the civilians.
US Federal Judge Ricardo Urbina dismissed the charges against the five, saying prosecutors violated their rights by using incriminating statements they had made under immunity during a State Department probe.
The case was among the most sensational that sought to hold Blackwater employees accountable for what was seen as a culture of lawlessness and a lack of accountability as the company operated in Iraq.
The guards, who had been part of a convoy of armoured vehicles, had been charged with killing 14 unarmed Iraqi civilians and wounding 18 others during an unprovoked attack at a busy Baghdad roundabout using guns and grenades.
Iraq says 17 people were killed.
"One of them has said what happened in Nisur Square, how they killed innocent Iraqi people that were just in their cars without any weapons," Mikhail said. "I am very astonished and I am waiting for the US embassy to give me the judge's decision (in full)."
"What happened was very bad, because so many innocent Iraqi people -- young, students -- were shot by someone who liked to shoot unarmed people."
Mikhail said she requested a meeting with US embassy officials in Baghdad. The embassy did not immediately confirm that the meeting would take place or, if it did, who it would involve.
The judge's ruling was welcomed by Blackwater chief executive Joseph Yorio, who said: "The company supports the judge's decision to dismiss the charges."
"From the beginning, Xe (Blackwater) has stood behind the hundreds of brave men who put themselves in harm's way to protect American diplomats working in Baghdad and other combat zones in Iraq."
The firm renamed itself Xe after the Iraqi government banned it last January over the killings.
Foreign security teams in Iraq long operated in a legal grey area, but under a military accord signed with Washington in November 2008, Baghdad won a concession to lift the immunity to prosecution previously extended to US security contractors.
Ordinary Iraqis expressed anger at Urbina's ruling.
"Dropping the charges against those guards disrespects the lives of the innocents who were killed," said Abu Uday, a university professor who did not want to give his first name.
Blackwater ended its operations in Iraq in May, after the US State Department refused to renew annual its contracts.
Headquartered in North Carolina, Blackwater was one of the largest security firms operating in Iraq with about 1,000 staff, and had been employed to protect US government personnel since the 2003 invasion.