The United States warned its citizens to be ready to leave Iraq in the event of what it has said could be a catastrophic collapse of the country's largest hydro-electric dam near Mosul.

Iraqi officials have sought to play down the risk but Washington urged its citizens to make contingency plans now.

A US security message cited estimates that Mosul, which is northern Iraq's largest city and under control of Islamic State insurgents, could be inundated by as much as 70 feet (21 meters) of water within hours of the breach.

Cities downstream on the Tigris River such as Tikrit, Samarra and the Iraqi capital Baghdad could be inundated with smaller, but still significant levels within 24-72 hours.

‘We have no specific information that indicates when a breach might occur, but out of an abundance of caution, we would like to underscore that prompt evacuation offers the most effective tool to save lives of the hundreds of thousands of people,’ the security message said.

Iraqi Prime Minister Haider al-Abadi said on Sunday precautions were being taken, but described the likelihood of such a scenario as ‘extremely small’.

Islamic State seized the dam in August 2014, raising fears they might blow it up and unleash a wall of water on Mosul and Baghdad that could kill hundreds of thousands.

The dam was recaptured two weeks later by Iraqi government forces backed by air strikes from a US-led coalition, but the disruption of maintenance operations has increased the likelihood of a breach.

An Italian company has been awarded a contract to make urgent repairs to the dam, which has suffered from structural flaws since its construction in the 1980s and requires constant grouting to maintain structural integrity.

Iraq's minister of water resources said earlier this month there was only a ‘one in a thousand’ chance the dam would collapse, and that the solution was to build a new dam or install a deep concrete support wall.