The United Nations said thousands of civilians had fled Tal Afar in the two days since the start of the broad offensive backed by the US-led coalition fighting IS.
In remarks in Baghdad after meeting Prime Minister Haider al-Abadi, US Defence Secretary Jim Mattis said the jihadists were "on the run".
"Cities have been liberated, people freed from ISIS, from Daesh," Mattis said, using alternative names for IS.
The jihadists had not been able "to stand up to our team in combat, and they have not retaken one inch of ground that they lost", he said.
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They launched an offensive Sunday to recapture Tal Afar, once a key IS supply hub between Mosul -- around 70 kilometres (45 miles) further east -- and the Syrian border to the west.
IS fighters inside Tal Afar, estimated to number around 1,000, responded with artillery fire Tuesday as Iraqi forces massed outside the city.
Army, police and units of the Hashed al-Shaabi paramilitary coalition later took "full control" of the Al- Kifah, Al-Nur and al-Askari districts of Tal Afar, the Hashed said.
The International Organization for Migration said "thousands of civilians" had fled Tal Afar since the offensive began.
Since Friday, more than 3,000 people had arrived at two IOM emergency sites, many with nothing but the clothes they were wearing, the UN agency said.
The UN's refugee agency UNHCR said it had received some 9,000 people at the Hamman Al Alil transit centre over the past week, and it was preparing to accommodate nearly 30,000 more.
"ISIS's days are certainly numbered, but it's not over yet and it's not going to be over anytime soon," he said.
Iraqi forces had "fought like the dickens in Mosul, (it) cost them over 6,000 wounded, somewhere over 1,200 killed," he said.
Yet that comeback restored the confidence of the Iraqi forces after their shock loss of Mosul and swathes of northern Iraq to IS in 2014.
Mattis stressed that retaking Mosul would not have happened "without... Abadi's steady hand", but was also due in part to extensive US support.
Mattis said his discussions in Iraq would focus on the way ahead, including how to keep the country from again politically fragmenting or falling further under Iran's influence.
A key issue is a plan for an independence referendum on September 25 in Iraqi Kurdistan, where Mattis met on Tuesday afternoon with the autonomous region's president Massud Barzani.
The poll is strongly opposed by the US, which believes it could undermine Abadi and distract from the fight against IS.
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