The UN's health body said due to a 70 percent gap in funding required to help, more than 5 million people need medical services in Iraq.
"The longer we wait, the more critical the situation becomes for those who need urgent, life-saving health services," World Health Organisation (WHO) regional director Ala Alwan said during a visit to Iraq.
The agency said that only 30.4 percent of the funding required by the health sector had been received, leaving a gap of $218.7 million (206 million euros).
"The situation is alarming," Alwan said.
"More than five million people in Iraq are currently in need of health services. While WHO and health partners are doing all we can to save lives, our efforts are hindered by insufficient funding."
On Saturday, Alwan visited the northern region of Kurdistan, which has welcomed many of the 2.5 million people displaced by conflict since last year.
Hundreds of thousands of people were forced to flee their homes when fighters from the Islamic State group swept through Iraq in June 2014, and thousands more have been displaced in efforts by Iraqi security forces to retake ground from the jihadists.
Alwan said that major disease outbreaks had so far been avoided but warned that any further delays in funding the health drive would put people's lives at risk.