Six minutes after coming on as a substitute for Tim Cahill, Kennedy rose alone in the middle of the penalty area to head Mark Bresciano's cross past the dive of Iraq goalkeeper Noor Sabri and into the net.
The stadium erupted and Kennedy was mobbed by his team mates as they celebrated the goal that secured the win they needed to seal second place in Asian qualifying Group B and a ticket to Brazil 2014.
The Australians, frustrated for much of the evening by their own lack of penetration as much as by the Iraqis, will now make their third successive trip to football's showpiece tournament and a fourth in total after 1974, 2006 and 2010.
"It's amazing for the country," captain Lucas Neill said in a pitchside interview.
"Three World Cups [in a row] now. I'm sorry, guys, it wasn't pretty but we beat what was in front of us. Tonight let's look at the positives, Australia are going to Brazil!"
Iraq's hopes of qualifying were ended by last week's defeat to group winners Japan. Australia's victory also ended the slim hopes of Oman and Jordan - who were meeting later on Tuesday - earning a direct passage to the World Cup.
Australia coach Holger Osieck kept faith with the team that drew 1-1 in Japan and beat Jordan 4-0 in their last two matches to revive a lacklustre qualifying campaign, but it was his substitutions that ultimately proved decisive.
"It gave me a beautiful feeling and I must admit that I'm proud to be part of this," the German said.
"There's a lot of positives, but now is not the time for any analysis, for any game critiques or anything, and I don't feel like doing anything [like that].
"I know there's going to be a tough year ahead but I think tonight we have the right and privilege to enjoy our qualification."
Iraq, who lost stalwarts Younis Mahmoud and Nashat Akram to retirement after last week's defeat, fielded a young side with half an eye on the upcoming under-20 World Cup.
Goalkeeper Sabri, a survivor of the 2007 Asian Cup triumph, captained the side and it was he who turned Cahill's left-footed shot around the post after two minutes.
It proved to be a false dawn, though, as the Australians were unable to break down the visitors despite camping in the Iraq half.
Defender Sasa Ognenovski headed the ball over the bar after 15 minutes and the next three chances fell to Cahill, but he failed to hit the target with any of them.
The official team-sheet indicated that Iraq had started with five forwards but their lack of adventure suggested otherwise, and it was not until just before halftime that they got a shot anywhere near goal.
Saif Salman gave notice of a little more attacking endeavour at the start of the second half with a long-range effort that tested Mark Schwarzer in the home goal.
Australia continued to pour into the Iraqi half but the final ball was often poor and when the shots came they lacked the power to trouble Sabri.
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