A routine patrol discovered five Katyusha rockets aimed and ready to fire at a base housing around 200 soldiers of the Light Infantry.
Major Charlie Burbridge said the 107mm calibre rockets would have caused many casualties if they detonated on target.
The Iraqi army made safe the weapons, which Maj Burbridge said had a range of 7km (4.35miles). No-one was arrested.
Maj Burbridge said: “Our confidence in the Iraqi army continues to grow and this demonstrates how capable [it] is becoming.
“We are grateful that their diligence and professionalism has been able to potentially save the lives of British troops.”
The development comes a month after it was agreed that Iraqi troops would have a much higher profile in patrolling the streets of Basra – the centre of the UK operation in Iraq.
Agreement was reached with Iraqi ministers for a new security plan for the city, intended to curb the local militias and tackle police corruption.
When the new set-up was announced, Defence Secretary Des Browne said: “I believe this plan can make a real difference to the lives of 1.5 million Basrawis.”