Iraq's autonomous Kurdistan region said on Friday that talks on reducing tensions with the federal government have stalled over the contentious issue of a newly-established northern military command.

Talks between federal and Kurdish security officials reached an impasse over Baghdad's refusal to scrap the Tigris Operations Command, which was "the basic requirement emphasised by the leadership of Kurdistan for normalising the situation," a statement on the Kurdistan government's website said.

The establishment of the federal Tigris Operations Command, which covers disputed territory in north Iraq, has drawn an angry response from Kurdish leaders who want to incorporate much of the area into their region.

Federal and Kurdish security officials held talks this week on reducing high tensions between the two sides in the country's north, which has seen military reinforcements sent to disputed areas.

An Iraqi military spokesman said in a statement on Monday that the two sides agreed to continue with talks and on activating coordinating committees between their forces, and to work to calm the situation and look for mechanisms to withdraw military units mobilised during the increased tensions.

The spokesman, Colonel Dhia al-Wakil, then said on Tuesday that a draft accord was to be finalised on Wednesday and presented to a committee for approval.

But the two sides ultimately disagreed on the details, according to top Kurdish security official Jabbar Yawar, who said the federal government originally approved 12 out of 14 of Kurdistan's demands, but later only agreed to three.

Fuad Hussein, Kurdistan president Massud Barzani's chief of staff, said in the statement on Friday that the best option for the region is now intensifying contacts on the crisis with the National Alliance, a grouping of mainly-Shiite Iraqi parties.

The dispute over territory in north Iraq is the biggest threat to the country's long-term stability, diplomats and officials say. Ties between the two sides are also marred by disputes over oil and power-sharing.