Heavy clashes took place between Iraqi government forces and Sunni Islamist militants who have made major advances in the past week.
Reports say parts of the city of Baquba – just 37 miles from Baghdad – have been taken over by the rebels.
The US is deploying up to 275 military personnel to protect staff at its huge embassy in the capital.
Reports from Baquba – capital of Diyala province on the northern approaches to Baghdad – say rebels are reported to have taken over several quarters and captured the main police station, seizing many weapons.
At Tal Afar, a strategic city west of Mosul in the province of Nineveh, there are reports that reinforcements have arrived to boost government forces trying to recapture the town from rebels. The Iraqi air force is said to have been carrying out strikes in the area.
Heavy clashes took place between Iraqi government forces and Sunni Islamist militants who have made major advances in the past week (photo AP)
The city of 200,000 people, which has a mixed Sunni and Shia population, lies between Mosul and the Syrian border and was taken just before dawn on Monday.
In Anbar province to the west of Baghdad, Sunni militants shot down a government helicopter near the city of Falluja, and say they destroyed several tanks in fighting there. They also say army forces fled from a military base near Ramadi, the provincial capital.
Qasem Suleimani, the commander of an elite unit of Iran’s revolutionary guards, is reported to be in Baghdad, helping military leaders and Shia militias co-ordinate their campaign against the rebels.
In Vienna, US officials held brief discussions about Iraq with their Iranian counterparts at a meeting about Tehran’s nuclear program, but American officials have been quick to dismiss reports of military collaboration with a major foe.
In a letter to Congress, President Barack Obama said the 275 military personnel being sent to Iraq would protect US citizens and the embassy in Baghdad, and would remain there until the security situation improved.
A White House statement said that their main role would be to help embassy staff to relocate to US consulates in the cities of Basra in the south and Irbil in the north, and provide airfield management and security.
President Barack Obama has already ruled out sending in ground troops to fight alongside Iraqi government forces, but drone strikes remain a possibility.
The aircraft carrier USS George HW Bush has been deployed to the Gulf, accompanied by two more warships.
The UN says that ISIS fighters have carried out hundreds of summary executions since their offensive began last week.
UN human rights chief Navi Pillay said that systematic killings in the north of the country “almost certainly amounted to war crimes”.
[youtube 47GsbrNejSo 650]
The northern Iraqi buffer city of Tal Afar has been seized by Sunni militants, officials and residents say.
Sunni militants led by ISIS – the Islamic State in Iraq and the Levant – captured key cities including Mosul and Tikrit last week, but some towns were retaken.
Fighting in Tal Afar began on Sunday, with mortar shelling of some districts as militants tried to enter the city.
The Iraqi military setback came as the US said it was considering direct talks with Iran on Iraq.
President Barack Obama is weighing up options on action to take in Iraq.
Sunni militants have seized the northern Iraqi buffer city of Tal Afar
The USS George HW Bush aircraft carrier is already being deployed to the Gulf, accompanied by two more warships. But Washington says no US troops will be deployed on the ground.
Iranian President Hassan Rouhani has said he will consider co-operation if the US takes action in Iraq.
Tal Afar is a mainly Shia and ethnic Turkmen city, and seen as a buffer against militant-controlled territory in Iraq and Syria.
The Iraqi government claims to have “regained the initiative” against an offensive by Sunni rebels.
Earlier, Iraqi army spokesman Lt. Gen. Qasim Ata said the military had scored successes against the militants in several areas, killing 279 of them. The figure could not be independently verified.
Local TV stations say government helicopters carried out a raid during the night on a military base near Mosul, which was captured by the militants last week.
Government forces were reported to be building up in the city of Samarra, north of Baghdad, ready for a counter-offensive on Tikrit.
The United States has begun evacuating some diplomatic staff from Baghdad, moving them to Kurdish-controlled territory in the north-east and to Basra in the south.
The US has also announced it is increasing security at its embassy in Baghdad and relocating some staff to safer areas.
[youtube oCZVkX1qPkE 650]
Two car bomb and suicide attacks killed at least 10 people and wounded another 15 in the northern Iraqi town of Tal Afar, according to police.
The car bomb exploded near a restaurant in Tal Afar centre. Minutes later, a man wearing an explosive vest blew himself up in a crowd of onlookers.
Tel Afar is not far from the Syrian border, just west of the city of Mosul.
Earlier, a car bomb reportedly killed two people and wounded seven in a western part of the capital, Baghdad.
There has been a rise in attacks in Iraq since US troops left in December, leaving more than 200 people dead.
The violence has come amid a marked deterioration in Iraq’s fragile political process, with the country’s most prominent Sunni Arab politician being sought by the authorities on terrorism charges.