The UN said Thursday it expected at least 700,000 people in Iraq's second city of Mosul would need assistance once an expected offensive on the Islamic State group stronghold begins.

"Mosul has the potential to be one the largest... disasters of many, many years," warned Bruno Geddo, the United Nation's refugee agency's main representative in Iraq.

Iraq is already facing one of the world's biggest displacement crises, with around 3.3 million people forced to flee their homes in the country since 2014.

IS seized Mosul along with other areas in June 2014, but Iraqi forces have since regained significant ground from the jihadists and are preparing a drive to retake the city by the end of the year.

In a sign the battle could happen soon, Washington said this week it would send some 600 extra troops to train local forces for the offensive.

Geddo warned that more than one million people might be displaced during that offensive.

"We are planning for at least 700,000 who will be in need of assistance, shelter food, water, everything that you need in a situation of humanitarian disaster," he told reporters in Geneva.

UNHCR has already begun building camps in anticipation of the exodus, but as it races against the clock, it is struggling to find available land and funds to build others, Geddo said.

The UN agency is hoping to have 11 camps finished by the end of the year with the capacity to hold 120,000 people, while Iraqi authorities expect to be able to house 150,000 more, he explained.

"This is the plan.... The capacity is much lower," he warned.

Even if the plan works, an estimated 430,000 displaced people would be left without accommodation.

To avoid leaving them without shelter, UNHCR is aiming to build a number of "emergency camps" located near the city and the surrounding villages where the battle is expected.

People would only stay at these sites for very short periods of time, he said, pointing out that once a village or an area was secured, people could hopefully return to their homes.

Geddo said the UN had already begun prepositioning work. "We will pitch our tents everywhere," he said.

While there has been much recent discussion about the launch of the drive on Mosul, preparations for it began months ago, with Iraq first announcing the launch back in March.

Since then, nearly 62,000 people have fled the city and surrounding areas, according to the International Organization for Migration.