Dr Rowan Williams, who has previously described the decisions which led to the war as "flawed", praised the "patient and consistent" efforts of troops on the ground.
But he used his address at the national service of remembrance in St Paul's Cathedral to remind his audience that the conflict remained highly controversial.
Among those in the congregation listening to his words was former prime minister Tony Blair, who led the country into war.
Dr Williams said: "Many people of my generation and younger grew up doubting whether we should ever see another straightforward international conflict, fought by a standing army with conventional weapons.
"We had begun to forget the realities of cost. And when such conflict appeared on the horizon, there were those among both policy makers and commentators who were able to talk about it without really measuring the price, the cost of justice."
The Archbishop alluded to the controversial nature of the campaign, known as Operation Telic, which brought hundreds of thousands of people onto the streets in protest in the run up to the war.
He said: "The conflict in Iraq will, for a long time yet, exercise the historians, the moralists, the international experts.
"In a world as complicated as ours has become, it would be a very rash person who would feel able to say without hesitation, this was absolutely the right or the wrong thing to do, the right or the wrong place to be."
Iraq veterans and bereaved families joined the Queen, Prime Minister Gordon Brown and senior military leaders for the poignant service.
Servicemen and women injured fighting during Operation Telic, and the families of those killed in the conflict, were also among the congregation.
Other senior royals attending included the Duke of Edinburgh, Prince of Wales, Duchess of Cornwall, Prince William, the Earl and Countess of Wessex and the Princess Royal.
Also present were significant figures who played important roles in the campaign, including former heads of the Army Sir Mike Jackson and Sir Richard Dannatt and former defence secretary Geoff Hoon.
Dr Williams praised the efforts of the forces on the ground, who he said were really the ones with the task of upholding Britain's "moral credibility".
The Archbishop said: "The demanding task of winning local trust in a chaotic, ravaged society like post-invasion Iraq was one of the heaviest responsibilities laid on armed personnel anywhere in recent times.
"Many here will know just how patiently and consistently that work was taken on.
"The moral credibility of any country engaged in war depends a lot less on the rhetoric of politicians and commentators than on the capacity of every serving soldier to discharge these responsibilities with integrity and intelligence."
He added: "Reflecting on the years of the Iraq campaign, we cannot say that no mistakes were ever made (when has that ever been the case?).
"But we can be grateful for the courage and honesty shown in facing them."
He concluded by thanking "those who have taught us through their sacrifice the sheer worth of justice and peace and who have shouldered some of the responsibility for fleshing out the values most of us only talk about".
Dr Williams has made several attacks on the Government over the Iraq war.
In December 2006 he told Radio 4's Today programme: "I am wholly prepared to believe that those who made the decisions made them in good faith - but I think those decisions were flawed.
"And I think the moral and the practical flaws have emerged as time has gone on - very painfully - and they have put our own troops increasingly at risk in ways that I find deeply disturbing."
The conflict claimed the lives of 179 British personnel - 178 servicemen and women and one civilian Ministry of Defence worker.
Tracey Hazel, 43, whose son Corporal Ben Leaning, 24, of the Queen's Royal Lancers was killed in 2007, was one of a number of civilians asked to take part in today's service and lit the Operation Telic memorial candle.
Speaking about her son, who died when the Warrior vehicle he was travelling in was blown up by a roadside bomb, she said: "At the end of the day, I wanted to be here for Ben and all the fallen - I feel so privileged.
"It was so nice they chose one of the parents to do it, as it's them that are left suffering when a loved one dies."
The 43-year-old, from Scunthorpe, was among the first group of families to be personally awarded the Elizabeth Cross - a military honour given to the relatives of service personnel killed in active service - by the Queen last month.
She said: "Ben, he was a right cheeky chappy. I feel so honoured. When I sit back and think of him, I see him with his massive smile.
"He really never let life get him down, I'm not saying he was perfect by any means, because nobody is, but he always made something good out of a bad situation."
Lance Corporal Gareth Thomas, a decorated Royal Marine, was chosen to say a prayer during the service.
The 27-year-old from Poole in Dorset served during the first few days of the Iraq War and, along with his unit, was tasked with stopping Saddam Hussein's forces destroying the country's oil infrastructure.
They succeeded and the lance corporal's remarkable bravery running through enemy fire to rescue colleagues earned him the Military Cross.
He said: "I feel very proud of what we've done. I like to think we laid the foundations for a better Iraq. Whether that happens or not remains to be seen.
"The service was a fitting way, I think, to remember those who did not come back."
Dr Williams suggested that a lesson from the build-up to the Iraq war was the importance of avoiding exaggerated rhetoric.
He said: "Perhaps we have learnt something, if only that there is a time to keep silence, a time to let go of the satisfyingly overblown language that is so tempting to human beings when war is in the air."
Mr Blair looked solemn as he listened intently to the Archbishop's address.
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