Kurdish forces 'break IS hold on Mosul dam'
Kurdish sources said they were still trying to clear mines and booby traps from the area round the dam, a process which could take several hours.
The strategically important facility was seized by IS militants on 7 August.
It supplies water and electricity to northern Iraq and there had been fears the IS militants could use it to flood areas downstream.
IS, formerly known as Isis, has seized a swathe of territory in recent months in Iraq and Syria.
If the recapture of the dam is confirmed, it will be the biggest reverse for IS since they launched their offensive in Iraq in June.
US special forces The US said it had destroyed or damaged 19 vehicles belonging to IS militants as well as a checkpoint in strikes round the dam on Sunday.
Hoshyar Zebari, a Kurd who until last month was Iraq's foreign minister, told the BBC that Peshmerga troops had encountered "fierce resistance" in the battle for the dam.
Thousands of Christians and Yazidis have fled their homes there in the face of the IS advance.
Frank Gardner, BBC Security Correspondent The past 48 hours have seen some significant developments in the growing push-back against the jihadist forces of Islamic State. With no air force of its own, Islamic State has found its newly acquired vehicles and military hardware to be vulnerable to precision missile strikes by US aircraft. It's now moving them into residential areas.
At the same time but without any apparent coordination, Syria has also reportedly carried out air strikes on Islamic State militants around their base in Raqqa. This could be a cynical move by President Assad to try to show he is on the same side as the Americans against extremism.
Then thirdly, in Iraq's Anbar province there are reports that Sunni tribesmen are once more moving against the jihadists, in the same way as they did in 2007.
However, it will take far more than this to unravel the enormous recent gains Islamic State has made across so much of the Middle East.
US special forces were on the ground helping to co-ordinate air strikes, Kurdish officials said.
Ali Awni, an official from Iraq's main Kurdish party, told AFP news agency that fighting was now taking place in the nearby Tal Kayf area.
An unnamed Peshmerga officer explained the importance of the dam for AP news agency: "It is very important for the life in this area, for drinking water, for agriculture and other things.
"The other important thing, which is more important, is that if ISIS [IS] blows up this dam, then Mosul, Baghdad and other places will be damaged and will no longer exist."
Massacres While US aircraft support the battle against IS militarily, Western states have been airlifting humanitarian aid to refugees, many of whom have found shelter in the Kurdish region.
IS militants have been accused of massacring hundreds of people in areas under their control in northern Iraq and eastern Syria.
At least 80 men from the Yazidi religious minority are believed to have been killed, and women and children abducted, in a village in Iraq on Friday.
IS is also accused of killing 700 tribesmen opposing them in Syria's Deir Ezzor province, over a two-week period.
The violence has displaced an estimated 1.2 million people in Iraq alone.
Pursuing an extreme form of Sunni Islam, IS has persecuted non-Muslims such as Yazidis and Christians, as well as Shia Muslims, whom it regards as heretics.
Iraq's new Prime Minister, Haider al-Abadi, who is from the Shia majority, is grappling with the challenge of uniting the country against IS and winning back the trust of alienated Sunni Iraqis.