The man who was killed at the Australian Embassy in Baghdad was shot in the head by a fellow contractor, it has been revealed.

The 34-year-old worked for security company Unity Resources Group, and was drinking in the early hours of Thursday morning with another guard.

The pair - both former Australian soldiers - were at the contractor's accommodation building Carl Hall when the shooting took place, News Corp reported.

Reports have emerged of a shooting at the Australian Embassy in Baghdad, Iraq (pictured)

The government confirmed the man's death on a statement on Friday.

'The Government extends its condolences to the family of the Australian man over this tragic incident,' the Minister for Foreign Affairs Julie Bishop said in a statement on Friday.

'All appropriate assistance is being provided to his family. The circumstances surrounding his death will be thoroughly investigated.

'He was working for Unity Resources Group, providing security services to the Australian Embassy.

'I am advised the high level of security is being maintained at the Embassy.

The embassy is located in the al-Latifiyah area south of Baghdad

'In light of the ongoing investigation, and out of respect for the man's family, the Australian Government will not provide further comment at this time.

The man killed was a former Australian special forces soldier, according to Fairfax Media reported.

The incident comes after concerns were raised about the security surrounding the complex earlier this year.