Iraqi security forces raided the man's house in Mandili, 100 kilometres northeast of Baghdad, to search for Shahla Najim al-Anbaky after receiving information that she had ties to the militant group.
They arrested her father, Najim Abd al-Anbaky, on Thursday when he confessed he had killed his daughter and buried her body near his house, said Major Ghalib al-Jubouri, a police spokesman in Diyala province.
"He confessed he killed her when he learned she worked for al Qaeda and she wanted to blow herself up," Jubouri said.
The man guided security forces to his daughter's grave, he said.
Overall violence has fallen in the last two years in Iraq as the sectarian bloodshed that followed the 2003 US-led invasion fades, but bombings and attacks still occur daily.
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