Susan Lindauer, 41, was arrested in her hometown of Takoma Park, Maryland, and was to appear in court later in the day in Baltimore, authorities in New York said.
She was accused of conspiring to act as a spy for the Iraqi Intelligence Service and with engaging in prohibited financial transactions involving the Iraqi government under Saddam Hussein.
According to an indictment filed in U.S. District Court in Manhattan, Lindauer made multiple visits from October 1999 through March 2002 to the Iraqi Mission to the United Nations in New York.
There, she met with several members of the Iraqi Intelligence Service, the foreign intelligence arm of the Iraqi government that allegedly has played a role in terrorist operations, including an attempted assassination of former President Bush, the indictment alleged.
The government said she accepted payments from the Iraqis for her services and expenses amounting to a total of $10,000, including $5,000 she received during a trip to Baghdad in February and March 2002, where she allegedly met with Iraqi intelligence officers.
Her acceptance of the money and her willingness to bring it home from Iraq violated a law prohibiting transactions with a government that sponsors international terrorism, the government said. The indictment did not specify a motive.
The charges against Lindauer were included in an expanded indictment in the case against Raed Rokan Al-Anbuge, 28, and Wisam Noman Al-Anbuke, the sons of Iraq's former liaison with United Nations weapons inspectors.
The brothers were charged last year with acting as Iraqi government agents and conspiring to do so, prosecutors said. The indictment said Lindauer conspired with the brothers.
On Jan. 8, 2003, prosecutors said, Lindauer tried to influence U.S. foreign policy by delivering to the home of a U.S. government official a letter in which she conveyed her access to and contacts with members of Saddam's regime. The official was not identified in the indictment.
The United States invaded Iraq last March, and the government fell the following month.
The indictment said Lindauer met on two occasions in Baltimore in June and July with an undercover FBI agent who posed as a Libyan intelligence representative who was seeking to support resistance groups in postwar Iraq. It said she discussed the need for plans and foreign resources to support these groups.
According to the indictment, she continued to correspond with the undercover agent until last month and followed the agent's instructions to leave packages on two occasions in August in "dead drop" operations.
Lindauer, who has not yet been assigned a defense lawyer, faces up to 10 years in prison on the most serious charge and five years on the lesser charge if she is convicted, prosecutors said.
Khaled Abdel-Latif Dumeisi, a 60-year-old suburban Chicago man, was arrested in July on charges of serving as an unregistered agent of Saddam's government, including spying on opposition leaders for Iraqi intelligence, federal officials said.
Last February, former Air Force Master Sgt. Brian Patrick Regan was convicted of offering to sell U.S. intelligence information to Iraq and China.