It is the first such meeting to be hosted by Iraq since before the late dictator Saddam Hussein's forces invaded Kuwait in 1990.
Amid heavy security precautions, foreign ministers from 11 Arab League members met on March 28 to prepare for the leaders' summit on March 29.
Foreign ministers from nations including Kuwait, Bahrain, Lebanon and Djibouti took part, but the summit is not expected to see high-level participation from Arab heavyweights such as Saudi Arabia.
The Syrian government, whose membership has been suspended by the Arab League over the year-old Syrian conflict, will not attend.
Following attacks that have killed dozens of people in recent weeks in Baghdad, the summit is taking place in the capital's heavily fortified "Green Zone" diplomatic area.
According to Radio Free Iraq correspondent Leith Ahmed, Iraqi authorities have an even higher security option if needed.
"If there is a shortfall or gap in the security...they would move it from the Green Zone to another palace near [Baghdad International] airport," he says.
He says the last minute contingency plan is part of extraordinary security precautions surrounding the summit.
Government offices have been shut for this week in order to clear central Baghdad of the heavy traffic that usually crams its streets.
The main transport routes from Baghdad International Airport to downtown Baghdad are being secured by 100,000 heavily armed police and troops.
A 'Vital Time'
On March 27, Iraqi Foreign Minister Hoshyar Zebari said that the summit comes at a "vital time" because of international diplomatic tensions over the Syrian crisis.
However, it was not immediately clear if leaders at the summit would be able to agree upon any major initiatives aimed at resolving the crisis.
One reason is that the initiative may have been overtaken by Syria's decision on March 27 to accept a peace plan proposed by the United Nations-Arab League envoy for Syria, former UN Secretary-General Kofi Annan.
Annan's plan calls for an immediate end to violence, humanitarian access to opposition-held areas that are besieged by government forces, and the start of dialogue between opposition leaders and officials from Syrian President Bashar al-Assad's regime.
Annan's proposals have been endorsed by UN Security Council members, including Russia and China, who earlier blocked two Security Council draft resolutions that condemned Assad's regime.
Iraq will chair the Arab League for one year after the summit concludes. To prepare for the gathering, Baghdad has spent an estimated $500 million on the summit.
Ahmed says the money has been spent on bolstering security as well as improving roads, hotels and conference buildings.
"They rebuilt five hotels," he says. "They also rebuilt the Republican Palace [in the Green Zone] and they rebuilt the highway between the capital and the airport. They also bought maybe 400 new cars to transport the visitors."
Iraq's government hopes a successful summit will mark the country's return to a key position in the Arab world after decades of isolation under the former regime of Saddam Hussein compounded by the chaos and bloodshed that followed the U.S.-led invasion of March 2003.