Founded in 1983 by Uday Hussein, the son of Saddam Hussein, Al-Rasheed were promoted to the top tier in their first season of existence and went on to win 3 league titles in a row, 2 FA Cups, 3 Arab Champions Cup titles, and reach the final of the 1988–89 Asian Club Championship.

A few days after their foundation, they played their first match in the second division (Baghdad Group) and it was against Al-Karkh, the team that would replace them in the top-flight seven years later; Al-Rasheed won the game 4–0.

They were promoted to what is now known as the Iraq Stars League in their first ever season, after achieving the 2nd Division title by beating Al-Najaf 1–0 in their final game.

The most popular of them were Ahmed Radhi, Adnan Dirjal, Samir Shaker, Haris Mohammed, Habib Jafar, and Laith Hussein.

Uday Hussein was also known to punish players who did not perform up to standards by ordering his guards to beat them, and often forced them to completely shave their heads before matches to embarrass them in public.

They finished 2nd in the 1985–86 Iraqi League,[4] but won the 1986 Saddam International Tournament which contained teams from all around the world including Iraq, Brazil, Kenya, Jordan, Morocco and Kuwait.

Al-Rasheed's biggest achievement in AFC competitions is that they reached the 2nd place of the 1988–89 Asian Club Championship, after losing by the away goal rule to Al Sadd.