The former Brazil captain's resignation comes with Iraq still battling for a place at the 2014 World Cup finals.
"I would like to inform via this website that I have sent a communication to FIFA ... and to the Iraq Football Association declaring that I consider my contract to be void due to the IFA's failure to abide by its terms," he said on his website. "I will provide further details shortly."
Iraq are third in Group B in the fourth phase of Asian qualifying with five points from five games, trailing second-placed Australia only on goal difference. Japan lead the group on 13 points.
The top two teams qualify directly for Brazil in 2014 while the third-place team goes into a playoff system.
Zico is widely considered one of his country's finest players but has refused to coach in his homeland, saying the pressure is too great.
Instead he has plied his trade abroad, most notably in a four-year spell with Japan, who he led to the 2006 World Cup and won the Asian Cup in 2004.
Since then, he has coached Turkish club Fenerbahce, reaching the Champions League quarter-finals once and Greek side Olympiakos.
Zico made his debut as Iraq coach against Jordan in September last year. He has been in charge for 21 games, with 10 wins and six draws. Iraq have played home matches in Doha for security reasons.