Iraq's central government has threatened to intervene militarily if the vote leads to violence.
Both Turkey and Iran condemned the vote, fearing it would inspire their own sizable Kurdish minorities, and both have carried out military drills this week on the borders of Iraq's Kurdish region.
Erdogan also said Turkey's Habur border crossing with Iraqi Kurdistan would be closed. However, it is created to give Masoud Barzani, who heads the Kurdistan Regional Government (KRG), a mandate to negotiate the secession of the oil-producing region.
"After this, let's see through which channels the northern Iraqi regional government will send its oil, or where it will sell it", Erdogan said in Istanbul.
Veteran Iraqi Kurd leader Massud Barzani, who initiated the vote, cast his ballot early in the morning, smiling and wearing a traditional outfit. "The moment we shut the valve, that's the end of it", Erdogan said.
Iran has denounced the "unilateral" scheme for independence, underlining the importance of maintaining the territorial integrity and stability of Iraq and insisting that the Kurdistan Region is part of the majority Arab country.
The State Department said last week the referendum would preclude the possibility of negotiations with the Baghdad central government, and present a high cost for "all Iraqis, including Kurds". The President said Turkey will announce measures against the independence vote later this week.
Turkey, the US, Iran and the United Nations warned that the vote would distract from operations against Daesh and lead to greater instability in the region.
However, KRG President Masoud Barzani defended the non-binding vote, saying only through the referendum can Kurds secure their future. They have also argued over the sharing of oil revenues, with the Kurds exporting through a Turkish pipeline over objections from Baghdad.
Iraq and other neighbours of the Kurds "have to understand that we have done this step by step", Bayan Sami Abdul Rahman told Al Jazeera.