Talabani, 79, who battled against Saddam Hussein for decades, has struggled to keep the peace between Iraq's scrapping sects since he was elected president April 6, 2005, two years after Saddam was toppled in the U.S. invasion.
Those efforts could fall apart if he's no longer active.
Talabani, whose health has been poor for some time, was reported to be in a critical but stable condition in a Baghdad intensive care unit after suffering a stroke Tuesday. Some Kurdish sources said he was in a coma.
The most immediate risk of a deterioration in Iraq's fractious and often violent politics centers of a simmering confrontation between government forces controlled by Prime Minister Nouri al-Maliki and Peshmerga fighters of the semiautonomous Kurdish enclave over disputed territory in northern Iraq.
Talabani, whose political influence extends far beyond his constitutional powers, was able recently to head off a potentially dangerous armed clash between Arab and Kurdish forces.
Massoud Barzani, president of the Kurdistan Regional Government, and Maliki agreed their forces would step back from the confrontation in the disputed zone along the Kurdish enclave's southern boundary.
The deal calls for an eventual military withdrawal by both sides in a standoff that has been building for years but reached crisis point in November. It threatened to plunge Iraq back into armed conflict that could lead to the breakup of the post-Saddam federal state stitched together by the Americans.
No formal timetable was agreed and both sides remain deeply distrustful of each other amid another worsening dispute over oil and gas resources and revenue-sharing between Maliki's Shiite-dominated coalition and the independence-minded Kurds.
The situation remains highly volatile and no withdrawal of troops, tanks and artillery has yet taken place on either side. Talabani was pressing them to disengage when he was stricken by the stroke.
"Iraq will be facing a real hard time if he's gone because few people enjoy his credibility," said Abdelaziz bin Saqr, chairman of the Gulf Research Center, a Dubai think tank.
"He has helped keep Iraq together against the wishes of Barzani and the agitation of Maliki."
The Kurds are opening their own energy industry despite bitter opposition from the central government.
The KRG has lured major international oil companies like Exxon Mobil, Chevron and Total of France to drill in Kurdistan, which covers three of Iraq's 18 provinces and sits on 45 billion barrels of oil and sizeable natural gas deposits.
Baghdad insists it's the sole authority on energy, particularly exploration licenses for oil and gas, and Baghdad-KRG relations have deteriorated dangerously on this crucial issue.
Maliki's big fear is that the Kurds, who under Talabani and Barzani fought a secessionist guerrilla war against Saddam's brutal regime for years, will break away once they have the economic underpinnings through oil and natural gas.
That could encourage other regions, including the Shiite-dominated south where two-thirds of Iraq's oil reserves lie, to demand autonomy.
Fragmentation would leave Baghdad with drastically reduced energy resources, and possibly none at all. Iraq would be in pieces probably allied to regional powers.
Landlocked Kurdistan would likely be linked to Turkey. Ankara has incensed Baghdad by offering to build oil and gas pipelines to its export terminals on the Mediterranean.
Indeed, Ankara's relations with Baghdad have become confrontational as Turkey's strengthened ties with Barzani and his Kurdistan Democratic Party.
The KDP, formed by Barzani's legendary father, Mulla Mustafa, who launched the Kurdish war against Baghdad back in the 1940s, has run Kurdistan in an uneasy alliance with Talabani's Patriotic Union of Kurdistan for more than a decade.
But that's been fraying and if Talabani goes, Kurdistan could be torn by civil war, as it was in the 1990s.
Salah Nasrawi, an Iraqi analyst who fled Iraq during Saddam's grotesque rule and now lives in Cairo, observed that Talabani's disappearance from the political arena could seriously upset the delicately balanced power structure with Maliki and Barzani that emerged under the Americans.
"If one of the three figures ...disappears, then the package has to be renegotiated," he said. "It will be nearly impossible to replace Talabani. There will be severe deadlock."