Pentagon press secretary Peter Cook said five IS militants were captured and others were killed in the raid on a compound near Hawijah, Iraq.
The US servicemember, who died of wounds suffered during the rescue mission, was the first to be killed in action since the US-led campaign against IS in Iraq was launched in June 2014, a US defense official said.
"This operation was deliberately planned and launched after receiving information that the hostages faced imminent mass execution," Cook said in a statement.
Cook said US helicopters and special operations forces accompanied Kurdish peshmerga forces to the prison compound.
The American who later died was wounded "acting in support of Iraqi peshmerga forces after they came under fire from ISIL," he said.
"Approximately 70 hostages were rescued including more than 20 members of the Iraqi security forces.
"Five ISIL terrorists were detained by the Iraqis and a number of ISIL terrorists were killed as well. In addition, the US recovered important intelligence about ISIL," Cook said.
"We commend and congratulate the brave individuals who participated in this successful operation that saved many lives, and we deeply mourn the loss of one of our own who died while supporting his Iraqi comrades engaged in a tough fight," he said.
Besides the Iraqi security forces, those freed included prisoners who were about to be executed as spies and residents of Hawijah, a coalition official in Iraq said.
"They'd executed four the previous day. We had seen mass graves had been dug on that compound and the information we now hear... Is that they'd been told they would be executed after morning prayers this morning," the official told AFP.
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