Iran's official news agency IRNA reported that the released were met by Iranian Embassy officials and are now awaiting a flight home.
A U.S. military statement said on Friday that, "The release followed a careful review of individual records to determine if they posed a security threat to Iraq, and if their detention was of continued intelligence value".
The group contains two of five diplomats arrested in a raid on an office housed in the same building as the Iranian consulate in Irbil, in northern Iraq, this January. The men were suspected by the U.S. to be members of Iran's elite Revolutionary Guards.
Aside from the two diplomats, the other prisoners released had initially been detained in various U.S. military operations in Iraq over the past three years.
On October 24, U.S. Secretary of State Condoleezza Rice accused Tehran of supporting militants in Iraq, and called Iran's policies "the single greatest challenge to American security interests in the Middle East and around the world."
She singled out the Quds Force, a special unit of Iran's Revolutionary Guards, for its actions in Iraq.
"We are determined to cut off Iran's malignant activities in Iraq by apprehending and eliminating Quds Force members and other actors who endanger human life and overall national stability," she said.
Yesterday some 500 Iraqi prisoners were released from American jails, in a gesture of "goodwill and reconciliation".
However, according to some estimates, American and Iraqi cells still contain up to 40,000 detainees, many of whom have been held for long periods without official charges.