The reprieve from football's governing body means Iraq, who have already been banned twice in just over two years, will be able to defend their Asian Cup title in Qatar next January.
"FIFA has taken note of the situation which surrounded the elections of the new IFA (Iraqi Football Association) board on 24 July 2010," said FIFA in a statement.
"Under these circumstances, the case was referred to the FIFA Emergency Committee which decided to extend the current mandate of the IFA Executive Committee for one year, meaning until 31 July 2011.
"This deadline should allow both groups to settle their differences and to thus permit the election of a new board."
The government of Shi'ite Prime Minister Nuri al-Maliki has been trying to remove top officials from sport bodies suspected of having ties to the Sunni-led former government of Saddam Hussein.
IFA President Hussain Saeed, who was once a senior official on the Olympic Committee controlled by Saddam's son Uday, is facing a challenge from Falah Hassan, backed by the Shi'ite-led government.
Iraq captured the world's imagination by winning the Asian Cup in 2007 but have struggled since then.
