Australian Federal Police are investigating the shooting death of a 34-year-old security contractor at the Australian embassy in Baghdad.
The incident will raise questions about security for diplomats and the Australian-founded private firm that guards the embassy workers. 
The former Australian soldier was shot dead early on Thursday morning. A fellow Australian guard, believed to be a former special forces soldier, was taken to a military base at Baghdad Airport for questioning, sources in Iraq said. Both worked for the Australian-founded Unity Resources Group (URG), one of the leading security firms in the Middle East, which has faced accusations in recent months of corner-cutting, though the Australian government has denied those reports.
Foreign Minister Julie Bishop confirmed only basic details of the incident, saying that a "tragic incident" had happened and that "there is a thorough investigation under way".
"We pass on our deep condolences to his family," she said of the victim.
While refusing to give details of the incident, Ms Bishop said "his death is not related to the broader security environment in Baghdad". She added that security was being maintained at "a high level" at the embassy.
The shooting is believed to have happened at the contractors' accommodation, which is within the broader embassy compound, giving the AFP jurisdiction to investigate. It is understood the victim was a former infantry soldier in the Australian Defence Force and the man being questioned was a former commando in the ADF.
In   February, Department of Foreign Affairs and Trade secretary Peter Varghese dismissed reports of problems with the contract with URG.
Mr Varghese told a Senate hearing that the reports of corner-cutting and a drop in the price paid by the department under the contact had come from "disgruntled former employees" and were "without foundation".