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"In beloved Iraq, blood is being shed among brothers in the shadow of an illegitimate foreign occupation, and ugly sectarianism threatens civil war," Abdullah said.
He also said that Arab nations, which are planning to revive a five-year-old Middle East peace plan at the summit, would not allow any foreign force to decide the future of the region.
In the past, Saudi leaders including Foreign Minister Prince Saud al-Faisal have often criticised US policy in Iraq but have never described its presence there as "illegitimate."
If Arab leaders recover trust in each other and regain their credibility, "the winds of hope will blow on the nation, and then, we will not allow forces from outside the region to determine the future of the region, and only the flag of Arabism will be raised on Arab soil," Abdullah said.
Arab foreign ministers meeting ahead of the summit agreed on Monday to call for an amendment of Iraq's 2005 constitution to give Sunni Arabs a greater share of power in the war-ravaged country and prevent its breakup.