Recep Tayyip Erdoğan, a Sunni leader whose premiership has greatly expanded Turkey's regional influence, was also expected to meet with one of Shiite Islam's top spiritual leaders to discuss the crackdown on Shiite protesters in the Gulf nation of Bahrain.
The Turkish premier will also appeal for more help from Baghdad in combatting terrorists and operate from safe havens in the north of Iraq.
At the top of his agenda, however, were business investments, including to help Iraq export oil and boost its dwindling electricity and water supplies.
"Increasing cooperation between Turkey and Iraq in all fields is of key importance for the stability and welfare of the whole region," Erdoğan told reporters Monday before flying out of the Turkish capital of Ankara. He arrived in Baghdad Monday afternoon.
"We aim to turn the Mesopotamian basin into a joint area of stability and welfare through a wide spectrum of projects, from energy to trade, from health to construction and from water resources to transportation," he said.
Iraqi leaders have worked to soothe relations with Turkey, which for years has battled the terrorist Kurdistan Workers' Party, or PKK. The PKK is based in northern Iraq's semiautonomous Kurdish region.
"PKK terrorism, which arises from the north of Iraq and is a threat to our country, is also an issue we will bring up with the Iraqi authorities," Erdoğan said.
Turkish warplanes have bombed terror targets in northern Iraq, and in February 2008, Erdoğan's government sent ground troops over the border in an eight-day incursion to hunt the fighters.
Reflecting Turkey's rising power and popularity in the Arab world, which cuts across sectarian lines, hard-line Iraqi Shiites welcomed Erdoğan's visit, in particular because of his tough positions against Israel.
Waiting for Erdoğan's arrival, about 1,000 supporters of anti-American cleric Muqtada al-Sadr lined the road leading from the airport into Baghdad, waving Iraqi and Turkish flags. The devout Shiites hailed the Sunni prime minister for his criticism of Israel since last year's deadly raid on a Turkish ship trying to break the blockade of the Gaza Strip. Israeli forces killed nine Turks in the operation.
"We came here to welcome and greet a man of heroic positions - especially his strong positions against Israelis," said Hasan Lazim Jumaa, 42, an intermediate school teacher in Baghdad's Shiite Sadr City neighborhood.
Iraqi government spokesman Ali al-Dabbagh called Erdoğan's two-day trip an important visit and said the Turkish premier also will meet with Grand Ayatollah Ali Sistani - Iraqi-based Shiism's highest ranking cleric in the Middle East - to discuss unrest in Bahrain and strife across the Arab world.
Political observers in Baghdad believe Sistani may ask Erdoğan to act as a mediator in Bahrain, where a Sunni monarchy has cracked down on Shiite-led protesters demanding greater rights and political freedoms.
Turkey, which has served as a mediator in many regional conflicts under Erdoğan, is also maintaining contacts with both sides in the fighting between Libyan rebels and Moammar Gadhafi's forces in an attempt to arrange a cease-fire.
Iraqi Prime Minister Nouri al-Maliki has repeatedly said he fears the unrest in Bahrain could spark sectarian violence around the Middle East - a particularly fearful scenario for Iraq, which is only just recovering from years of deadly Sunni-Shiite battles.
Ethnic clashes broke out Monday between Kurdish and Turkomen students outside a college in the northern city of Kirkuk. Eleven students were injured in the scuffles, which included rock-throwing, said police Brig. Gen. Adel Zein-Alabdin.
The competition for power in the oil-rich city involves Arabs, Kurds and Turkomen, and tensions have simmered there for years.
In Baghdad, three bombs exploded a few hours before Erdoğan's arrival, killing one person and wounding 13.
Scattered violence continues to plague Iraq on a daily basis.
And in the northern city of Mosul, a former al-Qaida stronghold, police said unknown gunmen stormed a family home, killing six women and a man in the early hours Monday before escaping.
A motive for the killing was not immediately known, although a policeman said it appeared to be a terrorist attack. Mosul still has pockets of Sunni insurgents around the city.
A morgue official at Mosul's hospital confirmed the death toll. All officials spoke on condition of anonymity because they were not authorized to release the information.