There were no casualties.
Only one day earlier, demonstrators had attacked several government buildings in the city, including Basra's provincial headquarters and the state television broadcast building.
One protester succumbed to his wounds after being shot in the head by security forces with a smoke grenade the night before, bringing the death toll this week to eight people.
The Basra Operations Command confirmed to Reuters calling off the curfew, which was due to start at 3pm local time (12:00GMT) as a measure to quell weeks-long protests which had intensified over the past week.
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As of Friday afternoon, the port remained closed, local officials and security sources said.
"Demonstrating is a sacred duty and all honest people ought to join".
Protesters also attacked a headquarters of the Iran-backed Asa'ib Ahl al-Haq militant group and set fire to its building in Bareiha area in central Basra, incurring heavy gunfire from the group's fighters, the source said.
Ali Saad, a 25-year-old at a rally on Thursday that was attended by thousands of demonstrators, said the government was treating protesters as "vandals".
Iranian foreign ministry spokesman Bahram Ghassemi called it a "savage attack", while Iraq's foreign ministry said it was "an unacceptable act undermining the interests of Iraq and its worldwide relations".
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Iran's foreign ministry spokesman Bahram Ghassemi denounced the incident as a "savage attack", according to Iranian news agency Fars.
Protesters are angry over electricity outages during the hot Iraqi summer, a lack of jobs and proper government services and corruption.
The Iraqi city of Basra has been rocked by growing protests since July..
At least 24 people have been killed in the demonstrations since they erupted in Basra on July 8.
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In a statement, the USA state department condemned the violence against diplomats and called on "all parties, including security forces and protesters, to uphold the right of peaceful protest and to protect diplomats and their facilities". Some fired live rounds into the air.