Iraqi troops and Kurdish Peshmerga forces, backed by US-led air cover, Monday advanced towards Mosul on the first day of an offensive aimed at recapturing the country's second-largest city from the Islamic State extremist organization.

President Masoud Barzani of Iraqi Kurdistan, in a press conference held near front lines east of Mosul, said that the allied forces had already cleared some 200 square kilometres of land that were previously held by Islamic State.

Iraqi state television quoted the military as saying that their forces had liberated 12 villages south of the city, which has been Islamic State's key stronghold in Iraq since the jihadists captured it in a mid-2014 offensive.

Prime Minister Haider al-Abadi had announced the long-awaited operation in the early hours of Monday. The battle is expected to be a decisive moment in Iraq's fight against Islamic State, which al-Abadi has vowed will be driven out of the country this year.

The attacking forces appeared to be between 20 to 40 kilometres from the city of Mosul by evening local time.

Assessing developments later on Monday, the US said Iraqi forces were ahead of schedule and expressed confidence that they would succeed.

"Early indications that they are ahead of schedule," Pentagon spokesman Peter Cook said, while noting it will be a "difficult campaign that could take some time."

White House spokesman Josh Earnest said that with "the symbolic importance that ISIL has invested in their control of Mosul, dislodging them from the city would be a significant strategic gain."

Barzani lauded the cooperation between the Iraqi federal forces and the Kurdish Peshmerga, who have at times had an uneasy relationship due to territorial disputes, some of them in Nineveh province around Mosul.

"This is the first time the blood of the Peshmerga and the Iraq army mixed on the battlefield. I hope this bodes well for the future," he said.

Warning that the autonomous Kurdish area of northern Iraq already has some 1.8 million displaced people, Barzani said the territory cannot cope with more outflows of refugees.

The Kurdish leader's warnings were echoed by the United Nations, which warned that up to 700,000 people fleeing the city could be in need of shelter.

Civilians trapped in the city were at an "extreme risk" of crossfire, booby traps set up by Islamic State, sniper fire, being used as human shields and even chemical weapons, UN humanitarian coordinator for Iraq Lisa Grande said.

The UN has six emergency sites ready that could take up to 60,000 people fleeing Mosul, but the Iraqi military estimates that 200,000 people might leave the city in the first week of the operation alone, Grande added.

Another humanitarian organization, Save the Children, warned that the lives of more than half a million children "hang in the balance" and called for safe routes out of the city to be immediately identified and maintained.

The group criticized Iraqi commanders over calls on vulnerable families and children to stay inside and put white flags on their homes.

"At best this is impractical in a brutal urban conflict. At worst, it risks civilian buildings being turned into military positions and families being used as human shields," Save the Children said.

Al-Abadi has said that his forces are intent on protecting civilians during the offensive.

Meanwhile, Turkish President Recep Tayyip Erdogan vowed that his country will take part in the operation to fight Islamic State in Mosul.

Turkey insisted it will not remove its troops from the Bashiqa base north-east of Mosul, despite continued calls from Baghdad for it to pull out.

Al-Abadi, in his announcement of the offensive, rebuffed Erdogan without referring to him by name, saying: "There has been an attempt in recent days to delay the liberation operation and create confusion, but, thanks be to God, He put it in its place, in the grave."

Islamic State overran Mosul in mid-2014 at the beginning of a lightning offensive that saw it seize swathes of Sunni Arab northern and western Iraq as Iraqi army and police units collapsed in the face of the onslaught.

The group is now on the back foot, having lost much of its territory to reformed and retrained Iraqi units and to Kurdish forces both in Syria and Iraq, all backed by intensive US-led airstrikes.

But analysts warn that its territorial losses may lead it to focus even more of its capacity on terrorist attacks at home and abroad.

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