The federal government wants to reduce the number of soldiers deployed in Iraq to a maximum of 500 forces.
The Federal Cabinet decided on this new upper limit.
Previously it was 700 soldiers.
After the withdrawal of tornado reconnaissance planes, the troop strength can now be reduced.
The current mission is a contribution from Germany in the fight of an international coalition against the terrorist militia "Islamic State" (IS).
Defense minister and CDU leader Annegret Kramp-Karrenbauer stated that IS will continue its terrorist activities "during the corona pandemic".
"The military pressure on IS must be maintained," said Kramp-Karrenbauer.
It is the wish of the Iraqi government to further develop the training of the Iraqi security forces through the NATO mission.
Germany will make an appropriate contribution to this, said Kramp-Karrenbauer.
In March, the Bundestag decided on a supplementary mandate for the withdrawal and some changes.
The core tasks set out in it are now to be extended by a further year, provided the Bundestag still gives its approval.
The US also wants to withdraw troops from Iraq
The mandate provides for the use of military tanker aircraft.
In addition, Germany provides air transport capacities for the anti-IS coalition as well as for international organizations, allies and partners.
Germany will also use airspace radar to detect planes and missiles at an early stage.
The Bundeswehr's ongoing training aid for Iraqi security forces will continue as normal, but is subject to restrictions due to the corona pandemic.
In addition to Germany, US President Donald Trump also wants to withdraw more US troops from Iraq, a high-ranking US government official told the AFP news agency.
Trump had already announced in August during a visit by the new Iraqi Prime Minister Mustafa Kadhemi to Washington that the US armed forces would leave Iraq.
However, he did not give an exact schedule.
There are currently around 5,000 US soldiers stationed in Iraq.