The offensive to seize Mosul, the Islamic State group's last major stronghold in Iraq, has resulted in fewer refugees than expected so far, US government officials said Monday.

Since the beginning of the US-backed Iraqi forces' advance three weeks ago, the fighting has displaced "just over 33,000 people," a US official said in a conference call with reporters.

"That is lower than initially expected, but it's important to keep in mind that the Iraq security forces still have not reached the most populous areas," he added.

Iraq's second-largest city has been an IS group stronghold since June 2014. At least one million people are believed trapped by the fighting, but it is impossible to verify the number after Mosul's more than two years under the jihadists' control.

The United Nations, the Iraqi government, nonprofit organizations and the US government have mounted a massive effort to help the refugees.

Some 50 trucks a day have been bringing food and other supplies to the Mosul region for the past several weeks to prepare for a flood of refugees, the official said.

Humanitarian agencies estimate as many as 700,000 people will flee the fighting.

Refugee camps currently have 80,000 places ready, with the aim of preparing a total of 250,000 by mid-December, US officials told reporters.

"This situation may be one of the best-prepared responses to a humanitarian emergency... that we have seen certainly in a long time," another US official said on the call.

Some of the Mosul refugees will find shelter with relatives and not need to go to the camps, humanitarian groups say.

Around half of the refugees have found their own shelter so far, US officials said.

Iraq forces retake key town on Mosul southern front: AFP
Hamam Al-Alil, Iraq (AFP) Nov 7, 2016 - Iraqi forces retook a key town from the Islamic State group Monday, a crucial objective on the southern front of the offensive to wrest back the city of Mosul.

Federal police, army and elite interior ministry forces established full control over Hamam al-Alil, the last town of note on the way to Mosul from the south, AFP reporters said.

It lies on the west bank of the Tigris river, about 15 kilometres (nine miles) southeast of Mosul.

Iraqi forces have already entered Mosul from the east and were moving close to the city limits from the north on Monday but have some distance to cover on the southern front.

Life quickly resumed in Hamam al-Alil, an AFP cameraman reported, with some residents re-opening shops and other bathing in the town's sulphur springs.

Hussein Khalaf al-Juburi, 73, was ecstatic.

"If I say I'm happy, it's not enough. It's more than happiness, more than joy. I thank the brave heroes who saved us from these tyrannical and corrupt groups," he said.

The Islamic State group "has no connection to Islam," he said.

Soldiers could be seen helping some displaced civilians with their bags.

The recapture of the town clears the way for Iraqi forces to push further north and move to within striking distance of the southern neighbourhoods of Mosul.

An officer with the federal police said clearing operations would continue around Hamam al-Alil before all the forces regroup to conquer the last stretch before Mosul.

The next phase is "to clear the other villages around the town and then move forward towards Mosul to liberate it, God willing," Colonel Amjad Mohammed told AFP.

Mosul's southern approach is home to the international airport, a vast military area and a large base that Iraqi forces were forced to flee with IS took over the city in June 2014.