Despite global opposition, the Kurdistan Regional Government backed the 25 September vote on Friday.
Iran, Turkey, the US, the UK and the UN have been among those voicing strong objections internationally.
There are concerns the referendum will provoke further instability in the country and hamper the battle against the Islamic State group.
Neighbouring Iran and Turkey - which both have Kurdish populations - also fear a Yes vote will bolster separatist movements in their countries.
Iraqi Kurdish leader Massoud Barzani has insisted the plans will go ahead.
Supporters had cheered on the streets of Irbil, the capital of Iraq's Kurdistan region, when the decision was made on Friday.
"We've been waiting more than 100 years for this," Omed Khoshnaw, of the Kurdistan Democratic Party (KDR), told Reuters news agency.
However, even among Iraqi Kurds there are divisions. The Change Movement, the main opposition party, boycotted the parliament session, saying it believed in independence but rejected holding the referendum at this stage.
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