This study examined whether literature-based instruction (LBI), implemented as guided narrative reading, reflective response, and intercultural inquiry, was associated with gains in empathy and intercultural communicative competence (ICC) among Iraqi university EFL students. A quasi-experimental pretest-posttest non-equivalent groups design involved two intact morning classes at Al-Muthanna University (enrolled N = 223; matched analytic n = 216). Across 10 instructional weeks, the experimental condition used short narrative fiction and dialogue-rich literary excerpts to structure emotional inference, perspective comparison, reflective writing, discussion, and scenario-based communication; the comparison condition followed department-aligned vocabulary, grammar, informational reading, and functional speaking work for equivalent instructional time. Baseline-adjusted ANCOVAs indicated higher posttest empathy and ICC in the experimental class, including all five ICC dimensions. The adjusted empathy difference was 0.61 points on a 1-5 scale (partial eta squared = .19), while the overall ICC group effect was partial eta squared = .25. Residualized empathy and ICC gains were moderately correlated (r = .46), but this exploratory association is not causal and may be inflated by shared self-report method variance. The findings support a bounded pedagogical conclusion: sustained LBI can provide productive conditions for reported empathic and intercultural development, although teacher/class confounding, the absence of a non-equivalent dependent variable, single-site sampling, and self-report measurement limit causal and transfer claims.