Nato will withdraw all of its remaining personnel from Iraq by the end of 2011 after it completed a seven-year training mission with Iraqi security forces.
An agreement to extend the programme "did not prove possible" Nato said, adding that weeks of negotiations had come to nothing.
It is thought the sticking point was Nato's request for legal immunity for its foreign trainers.
Despite the failure to extend the mission, the military alliance declared that its task had been a "success", and said in a statement that its forces "can be very proud of what they have achieved".
It said: "Nato remains fully committed to our partnership and political relationship with Iraq, through our existing Structured Cooperation Framework.
"Since 2004, NTM-I has trained over 5,000 military personnel and over 10,000 police personnel in Iraq, provided courses for nearly 2,000 more in Allied countries, as well as over 115 million euro worth of military equipment and a total of 17.7 million euros in trust fund donations from all 28 NATO Allies for training and education at NATO facilities."