A suicide bomber blew himself up on Sunday as he targeted a Shiite procession in Baghdad, killing two, authorities said.

The attack came as Iraqi security forces said they were on high alert for an imminent offensive to recapture the country's second city, Mosul, from the Islamic State Sunni extremist organization.

The attack in the capital's mainly Shiite Karada district injured another four people, the city's Operations Command, a security body, added.

Islamic State said one of its members had carried out a suicide attack on a Shiite procession in the area.

The targeted procession was part of wider religious events marking Ashura, a commemoration of the death of Hussein, the grandson of the prophet Mohammed.

The bombing comes a day after 40 people were killed in another suicide attack claimed by Islamic State on a funeral in the mostly Shiite neighbourhood of Shaab in northern Baghdad, police said.

Islamic State regards Shiites as heretics and regularly targets their religious events as well as public places in mainly Shiite districts.

The attacks come as the jihadist organization comes under the most severe military pressure it has faced since seizing swathes of mainly Sunni northern and western Iraq in a lightning offensive in mid-2014.

Sunday saw Islamic State lose control of the northern Syrian town of Dabiq, which held particular religious significance to the group, to Syrian rebels backed by Turkish tanks and airstrikes.

Meanwhile forces positioned around Mosul have entered their highest alert level ahead of the expected launch of ground operations to retake the city, Colonel Walid al-Nuaimi of the regional operations command said.

Kurdish troops and Shiite and Sunni militias are also in position for the assault on the largest city in Islamic State's dwindling self-declared caliphate.

Earlier on Sunday Iraqi warplanes dropped leaflets over the city seeking to reassure residents about the operations and calling on them to aid the security forces against the jihadis.

With aid agencies saying they are not yet ready to cope if hundreds of thousands flee the fighting, Iraqi Prime Minister Haider al-Abadi reviewed preparations to receive displaced people with the head of the UN's refugee agency.

Al-Abadi told UNCHR chief Filippo Grandi that his government was concerned "not just to liberate the land, but to liberate the people and ensure their security."

The UNHCR on Friday warned that approximately 700,000 people could be forced to flee Mosul.

According to the Norwegian Refugee Council, another aid group highly active on the ground in Iraq, there are just 51,000 spaces available in existing emergency camps, with another 230,000 planned or under construction.

Al-Abadi has vowed that Islamic State will be driven out of Mosul and all of Iraq in 2016. Mosul is its main remaining stronghold after security forces backed by US airstrikes regained control of the western cities of Ramadi and Fallujah earlier this year.

The group still controls some other less populated areas of western and northern Iraq, as well as large swathes of neighbouring Syria, mainly in the east near the Iraqi border and in the central desert.

Attempts to combat the group there have been complicated by the four-way civil war that also involves the al-Assad regime, mainly Sunni Islamist rebels, and Kurdish forces.

Both the regime and the rebels are focussed mainly on fighting each other.

The Kurds, backed by US airstrikes, have already recaptured most of the Kurdish-populated and mixed areas that Islamic State previously seized. But they are thought to have limited interest or capacity to push on into mainly Arab areas such as the jihadists' de facto Syrian capital of al-Raqqa.

Islamic State has meanwhile been managing its supporters' expectations, claiming that it will not be defeated even if it loses all the major cities it has captured in the two countries.

Analysts have warned that the group's territorial losses are likely to push it to shift focus from state-building to terrorist attacks such as the Baghdad bombings that killed 292 people in July or the truck attack that killed 86 Bastille Day revellers in the southern French city of Nice the same month.

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