Mr Fidan began his two-day visit on Wednesday and met Prime Minister Mohammed Al Sudani and President Latif Rashid. The official spoke on condition of anonymity ahead of an expected official announcement.
He is due to visit Iraq’s Kurdistan region where he will meet Prime Minister Masrour Barzani and other senior officials.
“Minister Fidan's visit, which includes Baghdad and Iraqi Kurdistan and will continue until Thursday, is supposed to pave the way for the visit of Turkish President Recep Tayyip Erdogan,” the official said.
A date for Mr Erdogan’s visit has not been set yet but it will be the first by a Turkish president to Iraq since Abdullah Gul came in 2009.
Before Mr Gul's trip to Iraq, Fahri Koruturk made the trip in 1976 when Ahmed Hassan Al Bakr was president of Iraq.
Mr Fidan on Wednesday called on Iraq to designate the Kurdistan Worker's Party, or PKK, a terrorist organisation during his first visit to Baghdad since taking office.
“Talks with his Iraqi counterparts were based on the issue of water and the resumption of oil exports from Iraqi Kurdistan to Turkey, in addition to the presence of the PKK in Iraq,” said the Iraqi official.
Iraq's water issues with Turkey stem from Ankara's push to build dams on the Tigris and Euphrates that have increased water scarcity during the past 50 years. Iran has also built dams on tributaries feeding the Tigris.
Mr Fidan's meeting with Mr Sudani resulted in an agreement for co-ordination between Iraq and Turkey, on various regional issues, said the official.
"Mr Al Sudani called on the Turkish side to increase water releases to the Euphrates river, as well as the formation of a permanent committee between the two countries to deal with the water issue," read a statement by Mr Sudani's office.
In recent years, Iraq has gone through its worst drought in decades, with temperatures exceeding 50°C last summer. Many of Iraq’s lakes have dwindled or dried up.
The UN has labelled Iraq as the fifth most vulnerable country in the world to climate change.
"The issue of water and dams on the Tigris and Euphrates rivers, two that originate from Turkey before passing through Iraq, is particularly sensitive between the two neighbouring countries," said the Iraqi official.
Mr Fidan also met Mr Rashid, who said afterwards: “We agreed on the benefits of enhancing our existing trade relations and the importance of reaching an understanding on an equitable water-sharing arrangement to address the water crisis in Iraq."