Iraqi captain Younis Mahmoud scored the winning goal in the 72nd minute when he climbed above the Saudi defence at the far post and headed home a corner from Hawar Mulla Mohammed.
The Saudis were bidding to become the first country to win the Asian Cup four times, but were outplayed by the Iraqis.
It was a triumph for Iraq's Brazilian coach Jorvan Vieira, 54, who had signed a contract with the Iraqi Football Federation only two months back.
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