The United States on Sunday condemned a "horrifying" massacre by Islamic militants said to have killed hundreds of Iraqi soldiers as they advanced on the capital after seizing vast swathes of northern Iraq.

Iraq said it had "regained the initiative" against fighters from the Islamic State of Iraq and the Levant, amid grisly reports of atrocities committed during the militants' lightning offensive.

Photos posted online were said to show Sunni militants summarily executing dozens of captured members of the security forces, while tweets attributed to ISIL claimed they had killed 1,700 Shia soldiers.

"The claim by the Islamic State of Iraq and the Levant that it has massacred 1,700 Iraqi Shia air force recruits in Tikrit is horrifying and a true depiction of the bloodlust that these terrorists represent," US State Department spokeswoman Jen Psaki said in a statement.

"While we cannot confirm these reports, one of the primary goals of ISIL is to set fear into the hearts of all Iraqis and drive sectarian division among its people."

Psaki said the US would evacuate some of its staff and boost security at its embassy -- America's largest worldwide, and located in Baghdad's fortified Green Zone -- due to "ongoing instability."

Australia followed suit, announcing it was withdrawing a number of officials from Baghdad, with only an "essential core" of embassy staff to remain.

US-trained Iraqi forces folded immediately as ISIL extremists captured key towns in swift succession last week, abandoning vehicles and positions and discarding their uniforms.

They seized Iraq's second biggest city Mosul and Tikrit, late dictator Saddam Hussein's hometown and capital of Salaheddin province. In four days, they came within 80 kilometres (50 miles) of Baghdad's city limits.

Iraqi officers said their forces were now starting to repel the militants, and that soldiers had recaptured two towns north of Baghdad.

As troops began to drive back the militants, they found the burned bodies of 12 policemen in the town of Ishaqi in Salaheddin province, a police colonel and a doctor said.

- Iran may work with US -

Washington has also deployed an aircraft carrier group to the Gulf as US President Barack Obama said he was weighing "all options" on how to support the Iraqi government.

But he has ruled out a return to Iraq for US soldiers, which left the country nearly three years ago after a bloody and costly occupation launched in 2003.

Iran, which supports Iraq's Shia-led government, has warned against foreign military intervention in the country, voicing confidence that Baghdad can repel the onslaught.

But reports suggest it already has a small number of its Revolutionary Guards in Iraq as military advisers.

Iranian President Hassan Rouhani said Saturday that Iraq had not asked for his country's help. But in surprise comments, he added that Iran may "think about" cooperating with archfoe America to fight the militants in Iraq.

US officials told The Wall Street Journal that the Obama administration may use nuclear talks starting in Vienna on Monday to discuss the Iraq crisis with Iran.

- Syria neglect blamed -

Iraqi Prime Minister Nuri al-Maliki's security spokesman, Lieutenant General Qassem Atta, said Sunday that Baghdad's forces have "regained the initiative" and killed 279 "terrorists" in the past 24 hours.

There was no way of independently verifying those assertions, however. Iraqi officials often announce large militant death tolls and downplay their own casualties.

Officials added that security forces and tribal fighters repelled a militant assault in the strategic town of Tal Afar near the Syrian border. It provides a critical corridor for militants to access conflict-hit Syria.

Ten people were killed in militant shelling of the town, and 18 anti-government fighters also died in ensuing clashes.

And militants took control of the Al-Adhim area in Diyala province, north of Baghdad, officers said.

Although violence has eased in Baghdad, apparently as militants concentrate their efforts elsewhere, the capital has not been spared, with a Sunday afternoon bombing killing nine people.

Baghdad's embattled forces will be joined by a flood of volunteers after a call to arms from top Shiite cleric Grand Ayatollah Ali al-Sistani, but a recruitment centre for volunteers came under attack on Sunday, killing six people.

Lakhdar Brahimi, the former UN and Arab League envoy to Syria, told AFP the international community's neglect of the conflict in Syria had precipitated the Iraq crisis.

"It is a well-known rule: a conflict of this kind (in Syria) cannot stay confined within the borders of one country," said Brahimi, who resigned as UN-Arab League representative to Syria last month.

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