Baghdad, the main setting of Assassin's Creed Mirage, is in modern-day Iraq.
Mirage follows Basim Ibn Ishaq in ninth-century Baghdad during the Islamic Golden Age. The historical city was the capital of the Abbasid Caliphate and an important center of scholarship, trade, government, and culture. The game's city setting is based on that historical Baghdad rather than on a modern open-world map of Iraq.
The story takes place before Basim's role in Assassin's Creed Valhalla. He begins as a street thief and becomes involved with the Hidden Ones, the organization that predates the later Assassin Brotherhood.
Because the game uses historical place names and older political boundaries, its setting should not be mapped directly onto modern borders without clarification. Baghdad itself is the key location, and the modern country containing it is Iraq.