Tens of thousands of Iraqi forces were making gains from the Islamic State group in Mosul Tuesday in an offensive US President Barack Obama warned would be a "difficult fight".

With the crucial battle in its second day, Iraqi commanders said progress was being made as fighters pushed on two main fronts against the jihadists' last stronghold in Iraq.

The US military, which is leading a coalition providing air and ground support, said Iraqi forces even looked "ahead of schedule" but senior Western officials warned the battle would take time.

"Mosul will be a difficult fight. There will be advances and there will be setbacks," Obama said, as the Pentagon warned IS was barring civilians from fleeing the city and using them as human shields.

"This will be, I think, a key milestone in what I committed to doing when ISIL first emerged," Obama said, using an acronym for the jihadist group, adding the Mosul operation was "another step toward their ultimate destruction".

Advancing in armoured convoys across the dusty plains surrounding Mosul, forces moved into villages defended by pockets of IS fighters after intensive aerial bombardment.

Some families cautiously approached security forces waving white flags while others remained in their homes, in line with the instructions contained in leaflets Iraqi aviation rained on the area in recent days.

In one village south of Mosul, part of the Al-Shura district, the men were promptly isolated and herded into a handful of buildings for screening.

"Our forces are checking profiles against information we have from local sources because we are trying to find IS members," a federal police major said.

Most of the men wore long beards because the IS members who ruled them for more than two years banned trimming them.

Abu Abdullah, a villager, asked one of the police fighters for a cigarette, also prohibited by the extremist jihadist organisation.

- 'Empty streets' -
On the eastern front, Iraqi forces entered Qaraqosh, which jihadists captured in August 2014 and was once the biggest Christian town in Iraq.

The town was still to be fully retaken but displaced Christians in the Kurdish capital of Arbil held prayers and then celebrated outside a church late Tuesday.

"We have been through a lot of suffering and today we are looking forward to returning to our region as soon as possible," said Hazem Djedjou Cardomi, as a crowd of hundreds around him danced and sang.

The long-awaited Mosul offensive was launched on Monday, with some 30,000 federal forces leading Iraq's largest military operation since the 2011 pullout of US troops.

Retaking Mosul would deprive IS of its last major Iraqi city, dealing a fatal blow to the "caliphate" the jihadists declared two years ago after seizing large parts of Iraq and neighbouring Syria.

Iraqi commanders said the jihadists were hitting back with suicide car bomb attacks but that the offensive was going as planned.

- Aid groups braced -
Iraqi forces have significant ground to cover before reaching the boundaries of the city, which IS is defending with berms, bombs and burning oil trenches.

IS forces are vastly outnumbered, with the US military estimating 3,000 to 4,500 jihadists in and around Mosul.

A video released Tuesday by the IS-linked Amaq news agency showed masked fighters in battledress patrolling a deserted, dimly lit thoroughfare in what it said was Mosul.

"America will be defeated in Iraq and will leave, God willing, again -- humiliated, wretched, dragging its tail in defeat," one of the fighters said to camera.

The US-led coalition said strikes destroyed 52 targets on the first day of the operation.

Most of the coalition's support has come in the shape of air strikes and training, but US, British and French special forces are also on the ground to advise Iraqi troops.

France will host an international meeting Thursday on the political future of Mosul, while the coalition's defence ministers will meet in Paris next Tuesday to assess progress on the military front.

Aid groups are bracing for a humanitarian crisis, with some warning they were preparing for the possible use of chemical weapons by IS.

Mosul is Iraq's second-largest city and the UN fears that up to a million people could be forced from their homes by the fighting.

"There are real fears that the offensive to retake Mosul could produce a humanitarian catastrophe, resulting in one of the largest man-made displacement crises in recent years," a UN refugee agency spokesman said.

- Chemical weapons fears -
Pentagon spokesman Jeff Davis said IS was preventing civilians from leaving Mosul.

"We know they are being used as human shields, absolutely," he told reporters.

The Red Cross said it was training healthcare workers and providing equipment to facilities around Mosul to deal with potential individuals contaminated with chemical agents.

Iraqi troops and police have been joined on the battlefront by an array of sometimes rival forces, including the Kurdish peshmerga, Sunni tribal fighters and Iran-backed Shiite militia.

IS once controlled more than a third of Iraq's territory but its self-proclaimed "state" has been shrinking steadily.

Experts say the jihadists are likely to increasingly turn to insurgent tactics as they lose ground.

IS has claimed a string of deadly suicide bombings in Baghdad in recent days.

The extremist group has also organised or inspired a wave of attacks in Western cities and on Tuesday the European Union's security commissioner raised concerns over the potential impact of Mosul's fall.