At a press conference in Baghdad on Wednesday, Iraq Deputy Prime Minister Tariq Aziz denied that he had defected.
He said, "The rumours [of my defection] are part of the psychological war being waged by the United States.
The rumours speak for themselves. As you see, I am with you in the great city of Baghdad.
The rumours had suggested that he had gone to Kurdish-held northern Iraq.
He also said it was "impossible" for President Saddam Hussein to go into exile.
"George Bush said he was asking the great leader Saddam Hussein to leave his country. This, obviously, is impossible.
"Bush is also asking the Iraqi people and the Iraqi armed forces to allow the entry of US forces. In other words, he wants to occupy Iraq for free, without a single shot being fired.
"This is an illusion, of course," Aziz said.
Aziz said the more than 250,000 US and British troops massed at Iraq's doorstep were "mercenaries".