Security forces battled for a second day Saturday with Islamic State group gunmen who infiltrated Kirkuk in a brazen raid that rattled Iraq as it ramped up an offensive to retake Mosul.

A toxic cloud released by a fire IS militants started at a sulphur plant south of Mosul earlier this week killed at least two civilians and forced some US service members to wear masks.

A day after the shock attack on the Kurdish-controlled city of Kirkuk, jihadist snipers and suspected suicide bombers were still at large, prompting Baghdad to send reinforcements.

Special counter-terrorism and intelligence units were hunting down some of the dozens of IS fighters who stormed public buildings early on Friday.

"We have 46 dead and 133 wounded, most of them members of the security services, as result of the clashes with Daesh (IS)," an interior ministry brigadier general told AFP.

The toll was confirmed by a source at the Kirkuk health directorate, which called for blood donations to assist with the emergency.

The Kirkuk police chief said 48 jihadist attackers had been killed so far and several others wounded, including a Libyan believed to be among the raid's leaders.

"The security forces control the situation now but there are still pockets of jihadists in some southern and eastern neighbourhoods," Brigadier General Khattab Omar Aref told AFP.

The large-scale "inghimasi" attack, a term for jihadist operations in which gunmen, often wearing suicide vests, intend to sow chaos and fight to the death rather than achieve any military goal, caught Kirkuk off guard.

The large city, which lies in an oil-producing region around 240 kilometres (150 miles) north of Baghdad, woke up on Friday to find jihadists roaming the streets of several neighbourhoods.

They used mosque loudspeakers to broadcast praise of their self-proclaimed "caliphate", which has been shrinking steadily since last year and is looking closer than ever to collapse.

- Distraction from Mosul -

Abu Omar, a 40-year-old butcher, spent 24 hours locked up in his home with his wife, mother and three children.

"It felt as if this day lasted a year," he said. "We could hear shooting and explosions all the time but we didn't dare venture outside to see what was happening."

Clashes broke in the countryside just east of Kirkuk between IS fighters fleeing the city and security forces, a senior regional security official said.

The attack, which is believed to have been carried out both by sleeper cells and militants who entered the city on Friday, was widely seen as an attempt by IS to draw attention away from their setbacks in the battle for Mosul.

Pentagon chief Ashton Carter arrived in Iraq Saturday to review the offensive, which his country and around 60 other nations support.

Mosul is the most populous city in the "caliphate" Baghdadi declared in June 2014, and the operation to recapture it is Iraq's largest in years.

With 3,000 to 4,500 IS men facing tens of thousands of Iraqi forces backed by massive US-led air power, the outcome of the battle is in little doubt.

But jihadists have been launching dozens of suicide car bombs against advancing forces, inflicting casualties and slowing their progress.

On Saturday, Iraqi federal forces moved into Qaraqosh, which lies just east of Mosul and was Iraq's largest Christian town before its population fled the jihadists in 2014, the joint operations command said.

Kurdish forces were also leading a major push northeast of Mosul, but complained that air support from the US-led coalition was insufficient and leaving them exposed.

- Sulphur cloud -

In his meetings in Baghdad on Saturday, the US defence secretary had been expected to attempt to convince the government to lift its opposition to the participation of Turkish forces, who have a base north of Mosul.

But Prime Minister Haider al-Abadi reiterated his rejection of Turkish participation in the offensive, saying that "this is something the Iraqis will handle".

Launched on Monday, the offensive is still in its early stages and is likely to involve a siege before elite forces enter the city and engage in street fighting with die-hard jihadists.

A key concern is the presence in Mosul of up to 1.2 million civilians, who are trapped and unable to leave until forces move closer and safe corridors are opened.

According to residents contacted by AFP, living conditions are deteriorating daily, with some food supplies running low and IS paranoia of informants greater than ever.

Earlier this week, IS fighters set part of a sulphur plant south of Mosul ablaze.

The toxic cloud it released killed two civilians in the area, a senior interior ministry officer told AFP in Qayyarah, the main staging base south of Mosul.

"Of course, this is affecting our planned progress," he said.

The local health centre said it had checked 500 people complaining of breathing problems.

Some US personnel at a nearby base wore protective masks Saturday after changing winds blew the cloud towards Qayyarah.

Iraqi officials said the fire at the Mishraq plant was extinguished later Saturday.

An Iraqi cameraman was killed by an IS sniper south of Mosul Saturday, a day after another TV journalist died of a sniper bullet to the chest during the Kirkuk clashes.