Sanchez then weighed in with two goals, the first a turn that confused three defenders before he shot low inside the near post in the 22nd.
The Barcelona forward scored again seven minutes later, heading home a cross from the right by Marcelo Diaz having taken up where he left off with a goal in Chile's 3-1 win over Bolivia in their most recent World Cup qualifier in June.
Sanchez then laid on two goals for Jean Beausejour, the first in the 37th minute with a neat backheel that the winger steered home off the base of the far post.
Two minutes into first half added time, Sanchez sent a through ball from midfield into the box where Beausejour nipped in front of a defender to chip over the keeper.
A series of changes from Chile past the hour, including the withdrawal of Sanchez and Beausejour, helped even the match for the last 30 minutes but the Chileans added a sixth goal from midfielder Angelo Henriquez 10 minutes from time.
Coach Jorge Sampaoli's Chile team, fourth in the South American World Cup qualifying group, are on course for a place at the their second successive finals in Brazil next year.
Iraq, who played at the 1986 finals in Mexico, failed to go through to Brazil 2014 from the final Asian qualifying groups.
(Writing by Rex Gowar in London; editing by Ken Ferris)
