Reacting to the deployment, Iraqi Prime Minister Haidar al-Abadi says his country will consider Turkey an "enemy" if there is a confrontation.
Turkey's armed forces deployed tanks and other armoured vehicles to the town of Silopi near the Iraqi border.
Ankara fears that both PKK terrorists and Shia militias, which the Iraqi army has relied on in the past, will be used in the anti-Daesh operation in Mosul and stoke ethnic blood-letting.
"We are right now in a serious fight against terrorist groups, both inside Turkey and just outside our border," Turkey's Defence Minister Fikri Isik said in Ankara on Tuesday.
"Turkey must be ready for all possibilities, the deployment is part of these preparations. We will not allow the threat to Turkey to increase."
The deployment coincides with an offensive by the international coalition to expel Daesh from its stronghold in the northern Iraqi city of Mosul.
Iraqi Prime Minister Haider al-Abadi warned Turkey against provoking a confrontation.
Al-Abadi said he does not want war but that "the invasion of Iraq will lead to Turkey being dismantled."
"If a confrontation happens, we are ready for it. We will consider [Turkey] an enemy and we will deal with it as an enemy," he said.
Ties between the two neighbours have been strained over Turkey's military base located in Bashiqa, northeast of Mosul. Turkey is training peshmerga and other local forces in the fight against Daesh.
Iraq accuses Turkey of violating its territory. But Turkey argues that it had prior permission from both Baghdad and the autonomous Iraqi regional government (KRG).
Ankara is also concerned that the PKK will take advantage of a security vacuum which may emerge after the end of the Mosul offensive, and use parts of northern Iraq, including Sinjar, as bases to launch attacks on Turkish soil.
Last week, Turkey's Foreign Minister Mevlut Cavusoglu said Ankara is considering a ground offensive if it feels threatened by developments in Iraq.
On Saturday, Turkish President Recep Tayyip Erdogan said Ankara will have a "different response" for Shia militias if they "cause terror" in Iraq's northwestern city of Tal Afar.
The city is home to a sizeable ethnic Turkmen population with historic and cultural ties to Turkey.
Erdogan's statement came days after Hashd al Shaabi, Shia militias aligned to the Iraqi government, torched two mosques, several homes and private vehicles in the country's town of Rutba, which is mainly inhabited by Sunni Muslims.