AFP Commissioner Krissy Barrett says the arrest marks a significant disruption to an alleged serious criminal and his illicit enterprise in Australia.
She says federal police have been working with domestic partners to dismantle the offender's criminal network, including targeting the alleged offender offshore.
"AFP members have met with a number of agencies offshore about this alleged offender. And I have had one-on-one conversations with law enforcement principals about this alleged offender," Ms Barrett said on Wednesday.
"Late last year, the AFP provided information to law enforcement officials in Iraq about this alleged offender. Iraqi officials have made an independent decision to arrest this alleged offender after launching their own criminal investigation."
Hamad is believed to be the leader directing organised crime operations in Australia from the Middle East.
The syndicate is believed to be behind several high profile firebombings, as it fights for control over the importation and distribution of illegal tobacco in Victoria.
Police revealed in March that several tobacco store owners were intimidated with threats linked to a so-called "Kaz Tax".
Detective Inspector Graham Banks described the incidents as extortion, saying some shop owners were so concerned for their safety that they sold their businesses and changed their addresses.
Police also suspect Hamad had been involved with the arson attack on the Adass Israel Synagogue in Melbourne in December 2024.
He was deported from Australia in 2023.
Iraq's National Centre for International Judicial Cooperation said on Tuesday that Hamad was "one of the most dangerous wanted men in the world".
"The accused individual ... was arrested in co-ordination with the General Directorate of Narcotics and Psychotropic Substances Affairs at the Ministry of Interior, after obtaining the necessary approvals from the Supreme Judicial Council to conduct investigations against him," the statement reads.
"The proceedings were initiated by the First Karkh Investigation Court, which specialises in drug cases."
The statement says Hamad is allegedly responsible for importing large quantities of drugs into Iraq and Australia, as well as smuggling heroin.
"He is also involved with the most prominent organised crime gangs in Australia - Sydney, responsible for shootings, murders, kidnappings, violent assaults, extortion, and drug imports," it says.
Iraqi authorities say they believe he is involved with outlaw gangs that have extensive influence within Australia and the Middle East.
"(They) are responsible for carrying out murders, shootings, money laundering, fraud, assaults, arson, and drug trafficking on a global level."
Federal police thanked Iraqi authorities for their work, adding they would co-operate with key partners to help keep Australians safe.
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