Westerwelle met his Iraqi counterpart Hoshyar Zebari and parliament speaker Osama al-Nujaifi, and was due to see President Jalal Talabani and Prime Minister Nuri al-Maliki, officials and the German Foreign Ministry said.
"We want to send a signal that we support the stabilisation of Iraq and the continuation of the democratic process," Westerwelle said, according to a statement released by the ministry.
Zebari hailed Westerwelle's visit, saying during their talks that it "sent a signal to other countries," a source close to the German delegation said.
He spoke of the complexity of the situation in Iraq, called for economic engagement alongside political dialogue, and said German companies were welcome in Iraq.
Westerwelle "expressed great concern over the levels of violence (against Christians and minorities), and in particular a recent wave of violence," the source said, on condition of anonymity.
According to the source, Zebari said the Baghdad government condemned the violence and wanted to see Christians live in peace in Iraq, and described Christian emigration from the country as a great loss.
A series of attacks against Iraqi Christians, notably the October 31 siege on a Baghdad church that left 44 worshippers and two priests dead, has sparked an international outcry.
Protection of the country's minorities was also raised in Westerwelle's meeting with Nujaifi and his deputy Qusay Sohail, according to a parliament official who did not wish to be identified.
The trio also discussed Iraq's political situation, with a months-long impasse finally giving way last month to a power-sharing deal that saw Maliki renamed premier but no new government yet formed.
Westerwelle is also due to meet Iraqi Christian leaders, German officals said, and he is accompanied by members of the Bundestag and a German business delegation.
Berlin will be looking to deepen economic engagement with Iraq as the war-ravaged country seeks to rebuild its moribund economy and crumbling infrastructure.
In particular, a bilateral deal on the protection of investments is expected to be signed with Industry Minister Fawzi Hariri, with the new accord helping improve "economic and legal conditions for German companies" working in Iraq, Westerwelle said in the statement.
Germany hosted a two-day investment conference for Iraq in November 2009 in a bid to promote trade between the two countries.