Sanchez was in inspired form for the South Americans, finishing the match with two goals and claiming two assists in a dominant display from Jorge Sampaoli's side.
Eugenio Mena opened the scoring with a sensational volley from the edge of the box after eight minutes before a quick-fire double from Sanchez put Chile 3-0 up within 30 minutes.
The Barcelona forward then laid on two sublime assists for Jean Beausejour to score a double and make it five before half-time before Manchester United forward Angelo Henriquez completed the rout in the second half with a scrappy close-range finish from Bryan Rabello's cross.
Sampaoli named a strong starting XI as he prepares his side for the important World Cup qualifying fixture against Venezuela on September 6. Sanchez was joined in attack by Arturo Vidal and Mauricio Isla.
Vladimir Petrovic's Iraq are a side in transition and their starting XI featured several players from the team that reached the semi-final of the recent Under-20 World Cup.
Chile made an electric opening and were duly rewarded as early as the eighth minute when a Marcelo Diaz corner was only half cleared as far as the edge of the area, where Mena hit a thunderous first-time volley that flew into the top corner.
Buoyed by that early advantage, Chile continued to press and Sanchez sent an effort from inside the box narrowly wide of the far post.
However, the Barcelona forward was not to be denied for long and he soon doubled the lead in the 22nd minute. The 24-year-old cut in from the left-hand side of the box before an exquisite drag back created the opening for him to hit a fierce left-foot shot beyond Noor Sabri.
It was 3-0 inside half an hour when Sanchez notched his second of the game, heading home from inside the six-yard area to cap a wonderful flowing move from Chile.
Iraq were completely overwhelmed by their opponents and the situation worsened as Chile ended the half with two goals from Beausejour within a dominant eight-minute spell.
The Wigan Athletic man first bundled home from just outside the area after a neat backheeled pass from Sanchez.
He owed his second to some more wonderful vision by Sanchez, who picked out Beausejour's run into the box before playing a perfectly-weighted throughball that the midfielder neatly dinked over the goalkeeper to wrap up an explosive first-half performance.
With the match essentially over as a contest, Chile lowered the tempo in the second half, although Manchester United forward Henriquez was lively up front and twice had efforts well saved.
Iraq had created no chances of note to that point, but they had legitimate claims for a penalty on the hour mark when Ala'a Abdul-Zahra appeared to be fouled by goalkeeper Claudio Bravo, but the referee only pointed for a corner.
Sanchez and Beausejour then departed, to a rousing reception from the Chile fans.
Rabello saw a shot rebound off the post before he created the sixth goal with 10 minutes remaining - the winger playing a driven cross from the right that was bundled home by Henriquez.
The result marked ideal preparation for Sampaoli's side ahead of turning their attentions back to their World Cup qualifying campaign while, by contrast, Iraq have now gone five games without a goal.
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