Simmering acrimony between the two governments neared a breaking point in 2008 as Kurdish and Iraqi forces bickered over jurisdiction in the city of Khanaqin, located in the north of Diyala province.
Analysts and observers of Iraq, however, worry that lingering tensions over everything from a national hydrocarbon law to territorial authority could undermine long-term security for Iraq.
"With the projected withdrawal of American combat forces in 2010, it's more urgent than ever to get some sort of resolution," says Daniel Serwer, an Iraq expert working with the U.S. Institute of Peace.
Serwer, in an interview with the Council on Foreign Relations, said the crisis is a "serious" issue facing Iraq.
Kurds had enjoyed near autonomy in a variety of measures, as witnessed by a decision regarding oil exports in June. But Serwer, who was the executive director of the Baker-Hamilton Commission on Iraq, says the balance of power has tilted in favor of Baghdad, leaving Kurds hoping for American assurances.
"I think the Kurds are acutely aware of the fact that their situation and leverage are not improving," he cautions.