But Kurdish region President Masud Barzani has said the vote is necessary because "all other bids" to secure full Kurdish rights "have failed".
Kurdish lawmakers convened parliament in Irbil for the first time in two years to pass the measure, with 65 out of 68 parliamentarians in the 111-seat body present voting in favor.
The regional parliament's decision came despite an intense diplomatic drive by the United States, which has provided critical military aid to the KRG's fight against Islamic State, to persuade the Kurdish leadership to cancel the referendum.
The White House urged the KRG to "enter into serious and sustained dialogue with Baghdad", over the issue.
"Holding the referendum in disputed areas is particularly provocative and destabilizing", it added.More news: 'Kohli better than Smith in limited overs'
Earlier on Friday, the Iraqi Kurdish parliament approved a plan to hold a referendum on independence on September 25.
"We still haven't heard a proposal that can be an alternative to the Kurdistan referendum", he said.
The opposition Gorran, the second-largest party in parliament, and the smaller Kurdistan Islamic Group, boycotted the vote and called it invalid.
Kirkuk has always been the center of dispute between Baghdad and the Kurds, raising the prospect that conflict could erupt between Arabs, Turkmen and Kurds.
Kurds across the Kurdistan Region and overseas gathered in a show of solidarity for the historic independence vote.More news: Here's What Disney World Looks Like After Hurricane Irma
Iraq's central government has rejected the polls as unconstitutional and illegal. But relations with Baghdad have grown strained in recent years over oil and the disputed areas.
USA officials, however, remain insistent: "There is no chance that this referendum, which will be held on September 25, will be given worldwide legitimacy ..."
The planned vote has faced strong opposition from the federal government in Baghdad as well as neighbouring Iran and Turkey, which fear it will stoke separatist aspirations among their own sizeable Kurdish minorities.
Several lawmakers from Kurdistan's main political parties expressed support for the referendum as they addressed the parliamentary session on Friday. While Baghdad recognizes Kurdistan's autonomy, the precise boundary between the region and the rest of Iraq is unclear.More news: Trump Praises Malaysia's Purchase of Boeing Jets, Fight Against Terrorism