The International Red Cross (ICRC) says five Iraqi children and two women are suffering symptoms consistent with exposure to chemical weapons.
They are being treated at a hospital near the embattled city of Mosul, which Iraqi forces are trying to wrest from so-called Islamic State (IS).
The ICRC did not say who was to blame.
IS militants have long been suspected of making and using crude chemical weapons in territory it controls in Iraq and neighbouring Syria.
The BBC's Imogen Foulkes in Geneva says this is the first report by an aid agency that chemical weapons have been used in the battle for Mosul.
The victims' symptoms suggested exposure to a "blistering chemical agent", ICRC Middle East director Robert Mardini said.
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They included blisters, redness in the eyes, irritation, vomiting and coughing.
Mr Mardini condemned the use of such weapons and said they were banned under international law.
The World Health Organization said it was aware of the case and was working with the ICRC to prepare for further cases.
It is not the first suspected use of chemical weapons in Iraq since IS seized large swathes of Iraqi and Syrian territory nearly three years ago.
In September last year, the US military said IS militants fired a rocket containing a mustard agent at American troops at Qayyarah air base near Mosul. There were no casualties reported.
They are also suspected of being behind suspected chemical attacks on Kurdish forces in northern Iraq.
According to a report released last November by the UK-based IHS Conflict Monitor, IS is suspected of having used chemical weapons on at least 52 occasions since 2014, with a third of those in areas around Mosul.
IS is not the only actor in the region accused of using chemical weapons, with the Syrian government alleged to be behind a number of chlorine gas attacks on civilians during the country's six-year long civil war.
The use of chlorine as a weapon is prohibited under the 1997 Chemical Weapons Convention.