"He is insulting me personally. You are not my interlocutor, you are not at my level," Erdogan told a meeting in Istanbul, in comments addressed to Abadi.
"It's not important at all how you shout from Iraq. You should know that we will do what we want to do," he added.
"Who's that? The Iraqi prime minister. First you know your place!"
Turkey has said its troops would remain in Iraq despite Baghdad's growing anger ahead of a planned operation to recapture Mosul from the Islamic State (IS) group.
Baghdad has repeatedly called on Ankara to pull out its troops, with Abadi warning the Turkish deployment risked a regional war.
The dispute between Ankara and Baghdad flared up after the Turkish parliament extended a government mandate by one year, allowing its troops to remain on both Iraqi and Syrian soil.
The Iraqi parliament has labelled the Turkish troops an "occupying force."
Erdogan today rejected the Iraqi premier's demand for a withdrawal.
The Turkish-Iraqi tensions risk complicating plans for an operation to save Mosul, which was captured by IS jihadists in 2014.
The Turkish president has expressed his country's willingness to join the battle under a similar understanding it had reached for the recapture of Jarabulus in Syria.
Turkey's army has launched an ambitious operation in Syria, backing up opposition fighters who recaptured the town of Jarabulus near the Turkish border from IS jihadists in September.
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