BAGHDAD — Less than two months after American troops left, the State Department is preparing to slash by as much as half the enormous diplomatic presence it had planned for Iraq, a sharp sign of declining American influence in the country.

Officials in Baghdad and Washington said that Ambassador James F. Jeffrey and other senior State Department officials are reconsidering the size and scope of the embassy, where the staff has swelled to nearly 16,000 people, mostly contractors.

The expansive diplomatic operation and the $750 million embassy building, the largest of its kind in the world, were billed as necessary to nurture a postwar Iraq on its shaky path to democracy and establish normal relations between two countries linked by blood and mutual suspicion. But the Americans have been frustrated by Iraqi obstructionism and are now largely confined to the embassy because of security concerns, unable to interact enough with ordinary Iraqis to justify the $6 billion annual price tag.

The swift realization among some top officials that the diplomatic build-up may have been ill-advised represents a remarkable pivot for the State Department, in that officials spent more than a year planning the expansion and that many of the thousands of additional personnel […]