The United States said Tuesday that it planned to downsize its embassy in Iraq, the largest US diplomatic mission in the world, in hopes of saving money after the end of the war.

The New York Times, quoting unnamed officials, said the United States would slash the 16,000-strong staff by up to half in a sign of declining influence and quality of life after US troops left in late 2011.

State Department spokeswoman Victoria Nuland declined comment on the article's specifics but confirmed that the United States was looking to "right-size" the enormous embassy in Baghdad.

"I think what we have here is an embassy structure that was built for a different time and that relied a lot on extensive contracting for a whole range of reasons, some of them historic, some of them security-related," Nuland told reporters.

"Our judgment now is that we can adapt that for today's Iraq, do our diplomatic business just as well and just as rigorously, but far more efficiently," she said.

Nuland said the United States would look at hiring more Iraqi employees at the embassy and using fewer contractors, who can be "very expensive."

The move marks a major change in planning for the State Department. US Ambassador James Jeffrey less than a year ago outlined plans to boost the size of the embassy in preparation for the departure of troops and the expected growing influence of neighboring Iran.

President Barack Obama, an opponent of the controversial 2003 invasion that ousted strongman Saddam Hussein, removed the last US troops after Iraq did not agree to plans to keep a residual force.

The New York Times said US diplomats have since been facing lengthy delays in approval for visas and have been struggling to arrange appointments with officials in Iraq, which has been mired in political crisis.

The newspaper also said that diplomats' living conditions had deteriorated without the troops, with the embassy running short of sugar for coffee and being forced to ration chicken wings enjoyed by some staff.

Asked about the newspaper's account of food conditions, Nuland criticized "whinging that was inappropriate" by some diplomats posted in Baghdad.