The Defense Ministry would not confirm the report in The Sun newspaper, saying only that "all operational deployments are under constant review" and that the army wanted to treat the third in line for the throne as an ordinary soldier.
However, Britain's Press Association and Sky News cited unidentified sources as saying Harry would quit the army if he wasn't allowed to go to Iraq.
Clarence House, Prince Charles' London office, insisted Harry was on track to go to Iraq, but declined to comment further.
"It's an army decision and always has been and always will be," a spokesman said on condition of anonymity in line with palace policy.
The Sun cited unnamed senior military officials as saying that the review was likely to lead to Harry being banned from the battlefield, but he could still go and do a desk job.
Weekend newspaper reports quoted Iraqi insurgents as saying that they would be targeting the prince.
Previously, it was believed Harry, a second lieutenant, would lead a team of 12 men in four armored reconnaissance vehicles, and could become the first royal to see combat since his uncle Prince Andrew served in the Falklands war against Argentina in 1982.
After graduating from Royal Military Academy at Sandhurst last year, Harry insisted on getting the opportunity to serve his country.
"There's no way I'm going to put myself through Sandhurst and then sit on my arse back home while my boys are out fighting for their country," he said in an interview to mark his 21st birthday. "That may sound very patriotic, but it's true."
Despite its hopes of treating Harry as an ordinary soldier, the Defense Ministry has said that Harry could be kept out of situations where his presence could jeopardize his comrades.
The son of the late Princess Diana, Harry has been a frequent face on the front of Britain's tabloid newspapers, which have provided a constant stream of coverage of his party-going lifestyle at some of London's liveliest nightspots.