A member of the US special forces in action.

AFP/Washington

Backed by US special operations forces, Kurdish troops stormed an Islamic State prison in Iraq early Thursday, freeing 70 hostages in a high-stakes operation that left a US service member dead, the Pentagon said.

Pentagon press secretary Peter Cook said five IS militants were captured and others were killed in the raid on a compound near Hawijah, Iraq. He said the service member died of wounds suffered during the rescue mission.

"This operation was deliberately planned and launched after receiving information that the hostages faced imminent mass execution," Cook said in a statement.

"It was authorised consistent with our counter-ISIL effort to train, advise, and assist Iraqi forces," he added, using an alternate acronym for Islamic State, the militant group that has sought to carve an Islamic caliphate out of large parts of Iraq and Syria.

Cook said US helicopters and special operations forces accompanied Kurdish peshmerga forces to the prison compound.

One of the Americans was wounded "acting in support of Iraqi peshmerga forces after they came under fire from ISIL," and subsequently died after receiving medical attention, he said.

"Approximately 70 hostages were rescued including more than 20 members of the Iraqi security forces.

"Five ISIL terrorists were detained by the Iraqis and a number of ISIL terrorists were killed as well. In addition, the US recovered important intelligence about ISIL," Cook said.

General Lloyd Austin, the commander of all US forces in the Middle East, described the rescue operation as "complex and highly successful."

'Tough fight'  

"We commend and congratulate the brave individuals who participated in this successful operation that saved many lives, and we deeply mourn the loss of one of our own who died while supporting his Iraqi comrades engaged in a tough fight," he said.

An intelligence official in the Kurdish-controlled city of Kirkuk, speaking on condition of anonymity because he is not authorised to talk to the press, told AFP that "high value detainees" were believed to be among those captured.

"The Daesh leaders in Hawijah all went missing after the raid. Their offices are closed and nobody knows where they went," a Hawijah resident said, speaking on condition of anonymity for fear of retribution. Daesh is the Arabic name for IS.

"The group's top Hawijah leader was detained and another senior leader too. A number of them were killed and several of the people held in that prison were freed," said another resident of the area.

Residents told AFP that several Chinook helicopters were involved in the raid and that several IS-run checkpoints in the area were targeted by air strikes.

"The aim of the operation was to free hostages in Daesh custody. They were detained in the former house of a local judge," the intelligence official in Kirkuk said.

Najmeddin Karim, the governor of Kirkuk province, confirmed that a commando operation was carried out overnight but did not provide details.

Kurdish peshmerga forces control Kirkuk and have long worked closely with the US-led coalition.

Iraqi security and allied paramilitary forces have in recent days been closing in on Hawijah from the south and west. The city lies about 240 km north of Baghdad.

Kurdish peshmerga forces, backed by US-led coalition air strikes, have also in recent weeks moved several kilometres closer to Hawijah, pushing down from the north and east.