With the advancement of technology ,the study of  cross-cultural communication via on line  has become  an important and researchable topic in linguistic theory and its applications.The  aims of  this study are two- fold (a)  exploring the influence of cultural diversity on on-line interaction between American  native  speakers (NSs) and  Iraqi non-native speakers (NNSs) of English which, together with other factors might potentially lead to what Thomas(1983) calls  "pragmatic failure" (PF), a main cause of communication breakdowns  and (b) specifying  which  type of PF  occurs more frequently between the two groups along with the reasons behind such failures. To achieve these objectives , a number of online chats conducted between (10)  American speakers of English and (8)  Iraqi graduate students of English were collected and analyzed on the basis of  Thomas' (1983) division of PF in an attempt to verify the assumption that pragmatic failure is a result of cultural diversity between the two groups of participants.Results  revealed that the cultural differences between the two groups  could be a major cause of misunderstanding ie. PF., a finding which can be  of value to  textbook designers and teachers of English as a foreign language (FL)who are required to improve students' pragmatic ability in classroom by focusing  not  only on their grammatical competence but also on their pragmatic competence.