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Gen Dukaczewski said the shells had been purchased in June after individuals contacted officials in its military zone in south-central Iraq.
"We were mortified by the information that terrorists were looking for these warheads and offered $5,000 apiece," he said.
"An attack with such weapons would be hard to imagine. All of our activity was accelerated at appropriating these warheads."
The general said the ammunition had been buried in order to avoid it being discovered by UN weapons inspectors.
They were located in a bunker in the Polish sector, but officials refused to reveal their exact whereabouts.
The former Iraqi regime of Saddam Hussein produced cyclosarin in the 1980s to fight Iran but was bound by UN resolutions following the 1991 Gulf War to destroy stocks and cease production.
However, inconclusive searches by inspectors led the US to accuse Saddam Hussein of failing to surrender chemical and biological weapons and were cited as one of the reasons for the US-led invasion in 2003.
In May this year, an artillery shell apparently filled with sarin exploded at a roadside near Baghdad but caused no serious injury.