The formation of a new military headquarters covering disputed territory in northern Iraq has sent already-poor relations between Baghdad and its autonomous Kurdish region plummeting.

The new Tigris Operations Command, based in Kirkuk city and covering all of the province of the same name as well as neighbouring Salaheddin and Diyala, has drawn an angry response from Kurdish leaders who want to incorporate much of the area into their autonomous region.

The latest dispute strikes at the heart of an unresolved row between Baghdad and the Kurdish regional government in Arbil over territory, oil and the interpretation of Iraq's federal constitution.

"The formation of the Dijla (Tigris) Operations Command in Kirkuk and Diyala is an unconstitutional step by the Iraqi government," Kurdish regional president Massud Barzani, an opponent of Iraqi Prime Minister Nuri al-Maliki, said in recent remarks.

"The intentions, aims, formation and actions of this command centre are against the Kurdish people, the political process, co-existence and the process of normalising the situation in the disputed areas."

Maliki, a Shiite Arab, responded by warning Kurdish peshmerga forces to "avoid provoking" Iraqi security forces.

"We call on peshmerga forces not to carry out any acts that arouse tensions and instability in those areas, and we advise them to stay away from government forces," said the statement, attributed to Maliki and referring to his position as commander in chief of Iraq's armed forces.

Kurdish leaders want to the expand their autonomous region across a swathe of territory that stretches from Iraq's eastern border with Iran to its western frontier with Syria, against the strong opposition of Maliki's government.

The unresolved row poses the biggest threat to Iraq's long-term stability, diplomats and officials say.

The central and regional governments are also embroiled in disputes over energy contracts awarded by Kurdistan that Baghdad regards as illegal, and a variety of other rows.

The Tigris Operations Command was set up on September 1 with its head Lieutenant General Abdulamir al-Zaidi saying it was intended to address poor security coordination in the area that had allowed several violent attacks to occur.

Zaidi, also head of the army's 12th division, which covers Kirkuk and parts of Salaheddin, insisted to AFP that his forces were not entering Kirkuk city, an ethnic tinderbox of Arabs, Kurds and Turkmen that is secured by the local police force.

But Kirkuk province's Kurdish governor Najim al-Din Omar Karim has refused to cooperate with the new command, arguing there was already sufficient coordination between existing institutions.

"I am the head of the (provincial) security committee, which includes commanders of the police, intelligence agencies, peshmerga, and the 12th brigade of the Iraqi army -- we already have major cooperation, we don't need a new operations command," he said.

"The Iraqi army must not intervene, we cannot accept the imposition of martial law on us."

US forces played a coordinating role between Kurdish and Arab forces in disputed territory, particularly in Kirkuk, forming joint patrols and checkpoints comprised of US soldiers, Iraqi soldiers and troops, and Kurdish peshmerga forces.

Most Iraqi policemen in Kirkuk are Kurdish, while the majority of Iraqi soldiers are Arab.

But since US forces withdrew last year, relations between Baghdad and Arbil have become increasingly bitter, with Barzani saying earlier this year he feared Maliki would use soon-to-be-delivered US-made F-16s to attack Kurdistan, and pushing to withdraw confidence from the premier's unity government.

Maliki insisted in an earlier statement that the new command centre did not target any specific group and that it was set up solely to fight terror.

Kurds, however, remain unconvinced.

"We respect and appreciate the Iraqi army, it belongs to all of us, but it must stay in the barracks and work for security at the border," Karim said.