The Islamic State's capture of Sinjar raised fears for minority groups that had found refuge there and further blurs the border between the Syrian and Iraqi parts of the "caliphate" which the IS declared in June.
"The (Kurdish) peshmerga have withdrawn from Sinjar, Daash has entered the city," Kurdish official Kheiri Sinjari told AFP, using the former Arabic acronym for the IS.
"They have raised their flag above government buildings," the Patriotic Union of Kurdistan (PUK) party official said.
"The peshmerga have withdrawn to mountain areas and are getting reinforcements," a high-ranking peshmerga source said.
Sinjar had sheltered thousands of people who were displaced by the IS offensive launched in the region nearly two months ago.
Among them are many of Iraq's minorities, such as Turkmen Shiites who fled the city of Tal Afar, about half-way between Sinjar and Mosul, when jihadist fighters swept in.
"A humanitarian tragedy is unfolding in Sinjar," the top UN envoy in Iraq, Nickolay Mladenov, said.
Its capture prompted thousands of families up to 200,000 people, according to the UN to flee, many of them into the neighbouring mountains.
"The United Nations has grave concerns for the physical safety of these civilians," Mladenov said, as they risk being stranded with no supplies in roasting temperatures and surrounded by jihadists.
UN chief Ban Ki-moon, in a statement, said he as "particularly appalled by the humanitarian crisis the actions by IS and associated armed groups have triggered".
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