KRG leader Massud Barzani has announced that the "time has come" for the region’s Kurds to hold a referendum on statehood, his presidency said on Wednesday.
Iraqi Kurdish forces are a key US partner in the war against DAESH.
"The time has come and the conditions are now suitable for the people to make a decision through a referendum on their future," Barzani said.
"This referendum would not necessarily lead to (an) immediate declaration of statehood, but rather to know the will and opinion of the people of Kurdistan about their future," said Barzani, who has remained in power despite the expiration of his tenure as president.
Iraq’s federal government opposed the move of a referendum on independence and the issues of which areas KRG will cover.
Kurdish forces now hold parts of four more regions over three which the federal government wants to maintain control.
In the summer of 2014, Iraqi federal forces fled areas in the northern part of the country amid offensive by DAESH, allowing the Kurdish forces to gain control over territories claimed by both KRG and Baghdad.
Kirkuk, an oil-rich province which is held by Kurdish Peshmerga forces, will be a particular point of tension due to wealth of natural resources there.
KRG has been exporting oil via Turkey from four northern provinces since a signed deal between it and Baghdad on oil and revenue sharing stopped last year.
Both Baghdad and KRG are facing an economic crisis due to fluctuating oil prices, on which they heavily depend for a vast majority of funds and revenues.
However, KRG do not have the same access to the loans and bond markets that Baghdad can turn to in order to be financially stable.