The assault on the town of Tal Afar, which lies along a critical corridor to war-torn Syria, was the latest in a week-long militant offensive that has spurred the American and Australian embassies to begin evacuating some staff.
Militants from the Islamic State of Iraq and the Levant (ISIL) jihadist group are also said to have killed scores of Iraqi soldiers as they pushed an advance on the capital, including in a "horrifying" massacre that has drawn international condemnation.
Abdulal Abbas, the local official responsible for the town and surrounding area, said Tal Afar was dealing with "martyrs, wounded, chaos and refugees," and that around 200,000 people -- nearly half the area's population -- had fled.
The town, which lies near the Syrian border in otherwise Sunni Arab and Kurdish-dominated Nineveh province, had briefly held off a militant offensive that saw fighters led by ISIL take control of vast swathes of territory north of Baghdad in a matter of days.
The sweeping unrest has prompted a partial diplomatic evacuation from Baghdad, confirmed thus far by the United States and Australia.
Washington also announced that its sprawling embassy -- which sits in Baghdad's heavily-fortified Green Zone -- would receive even more security.
State Department spokeswoman Jen Psaki said some embassy staff would be "temporarily relocated" to US consulates in the southern port city of Basra, and the northern Kurdish regional capital of Arbil, both of which have been insulated from the latest unrest.
Others would be flown to the US embassy in Amman, Psaki said, citing "ongoing instability".
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