Iraq conceded the lead three times to draw 3-3 with South Korea on Sunday before winning the penalty shootout to reach its first Under-20 World Cup semifinal.
Striker Farhan Shakor, who scored twice in regulation, converted the decisive penalty after Lee Chang-geun's spot kick was saved by goalkeeper Mohammed Hameed.
Iraq, which beat Paraguay 1-0 through Shakor's goal in extra time in the previous round, will play Uruguay for a place in the final.
After the match ended 2-2, Farhan looked to have sent Iraq through with his goal in the 118th minute, only for Jung Hyun-cheol to equalize for South Korea with the last kick of the match.
Ghana and Chile were scheduled to play their semifinal later Sunday, with the winner taking on France.