"Thousands of heavily armed peshmerga units are now completely in their positions around Kirkuk," a top aide to Kurdistan regional president Masoud Barzani tweeted.
"Their order is to defend at any cost," Hemin Hawrami said.
The alert came after the Kurdish authorities accused the Iraqi government of massing forces in readiness for an offensive to seize Kurdish-held oil fields around Kirkuk, as tensions soar after a vote for independence last month.
They accused the Popular Mobilisation Forces (PMF) - paramilitary units dominated by Iran-trained Shiite militia - of massing fighters in two mainly Shiite Turkmen areas south of Kirkuk in a bid to provoke a confrontation.
Hawrami urged the international community to intervene and call on Iraqi Prime Minister Haider al-Abadi to "order PMF to pull back if he can or if they listen to him"
"No escalation from our side. Just defend and roll them back if they attack," the senior Barzani adviser said.
The surge in tensions comes two weeks after Kurdish voters overwhelmingly backed independence in a non-binding referendum that the federal government condemned as illegal.
Polling was held in the three provinces that have long formed an autonomous Kurdish region as well as neighbouring areas, including Kirkuk, that Kurdish forces seized from the Islamic State group during the fightback against the jihadists' 2014 offensive through areas north and west of Baghdad.
Baghdad continues to reject decades-old Kurdish ambitions to incorporate Kirkuk and other historically Kurdish-majority areas in their autonomous region.