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"I don't think it is at all likely that New Zealand would put boots on the ground there," he told New Zealand reporters after visiting the 9/11 memorial site.
It was a civil war between two religious groups.
"We are not a country out there looking for a fight."
Any involvement by New Zealand was likely to take the form of humanitarian aid to be given to non-Government organisations for distribution.
The Ministry of Foreign Affairs was drawing up a proposal at present to canvas where aid could be given.
"But I don't see our involvement in Iraq being any greater than that."
He would be discussing the fast unfolding situation with US President Barack Obama at their White House meeting at the end of the week.
Mr Obama has ruled out taking part in a ground war in Iraq, but he has informed Congress the US is reportedly deployed up to 275 combat-ready military personnel to Baghdad to protect the US embassy there.
An aircraft carrier, USS George HW Bush, has been deployed to the Persian Gulf for possible support.
In an interview with Reuters he raised the possibility of sending in special forces to help to train Iraqi troops.
Mr Key ruled out any deployment of New Zealand's SAS to train.
Reports emerged at the weekend of mass killings of Iraqi troops by the al-Qaeda breakaway Islamic State of Iraq and The Levant (ISIS) which has gained control of north Iraq.
And in fighting at a police station in Baquba, just 60km from Baghdad, 44 prisoners being held there were reportedly killed yesterday.
New Zealand took part in the invasion of Afghanistan following the September 11, 2001 attacks in the United States.
But it did not support the invasion of Iraq. It was only after the United Nations Security Council passed a resolution lifting sanctions on Iraq that New Zealand contributed. It sent about 60 engineers to support British forces in southern Iraq in non-combat roles.
Mr Key said that like any global issue New Zealand would always look to the United Nations Security Council for its view and its sanction of what should happen.
"You can never say never, that in a world where the Security Council decides that Iraq needs support of some sort, engineers, whatever it might be, that could always be considered but I think that is very unlikely."
Mr Key expected any involvement by New Zealand would be within Security Council sanctions but would not be categorical.
"You always want to give yourself some flexibility but I just think it is not a situation where we are likely to get asked to go and provide some support in an isolated group of small countries. I don't think that is the way Iraq will play out."
At the 9/11 memorial, Mr Key paused in silence for a few moments at the wreath given on behalf of New Zealand.
He walked around the two large sunken reflection pools where the Twin Towers once stood, and which carry the names of the 2977 people killed on September 11 in New York, at the Pentagon and on Flight 93.
He paused at the names of the two New Zealanders killed, Alan Beaven and John Lozowsky, and that of his former Merrill Lynch boss Michael Packer who had been giving a speech in the World Trade Centre when the planes struck.
Mr Key also took a tour of the 63rd floor of One World Trade Center, single 104-storeyed tower that has gone up next to the memorial park.
It has not yet been completed inside but is 60 per cent let.
It cost $NZ4 billion to build.
- By Audrey Young in New York