Finland's National Bureau of Investigation (NBI) in cooperation with the police in Ostrobothnia arrested the suspect in the Vaasa region early on Tuesday morning.
The man is facing murder with terrorist intent and aggravated war crimes charges, which police allege he carried out during the Camp Speicher massacre. At least 1,000 people were killed in the June 2014 attack, with death toll estimates reaching as high as 1,700 people.
Police say the suspect arrived to Finland in the autumn of 2015. Finnish law enforcement carried out a preliminary investigation in close cooperation with Iraqi authorities. Finnish investigators visited Iraq twice during the investigations.
NBI Chief Inspector Jari Räty said the Iraqi arrested outside of Vaasa is the only individual suspected of terrorism in the area. Räty said there is no reason for people to be alarmed.
"The crimes that the person is suspected of committing are ones that took place in Iraq two years ago. We have no information indicating that he or someone else is planning an attack [in Finland], Räty said.
Terrorism cases pending
The NBI says it is investigating another case connected to the Camp Speicher massacre.
Officials say they are also investigating two brothers living in Finland who are suspected of murder and having been members of the Islamic State. That case is scheduled to begin at Pirkanmaa District Court on Thursday.
On Sunday it was reported that Iraq had hanged 36 men convicted of the killing of hundreds of soldiers in the Camp Speicher massacre.