Abadi yesterday declared victory in Iraq's three-year war to expel the jihadist group that at its height endangered the country's very existence.
Iraqi army units marched through the main square in central Baghdad as helicopters and fighter jets flew overhead, witnesses said.
The parade was not broadcast live and only state media were allowed to attend.
Abadi had declared a public holiday today after making his announcement, in which he said Iraq had defeated the jihadists "through our unity and our determination".
Backed by a US-led coalition, Iraqi forces gradually retook control of all territory lost to the jihadists over the last three years.
Experts warn that IS remains a threat, with the capacity as an insurgent group to carry out high-casualty bomb attacks using sleeper cells.