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Up to one million more Iraqis are at risk of being displaced as government forces continue to engage in fierce battles with the Islamic State group to recapture the final IS-bastion, Mosul, the Red Cross said Friday.

More than three million Iraqis have already been forced out of their homes by escalating violence over the past two-and-a-half years.

"The International Committee of the Red Cross believes that up to a million  more people could be forced to flee their homes in Iraq in the coming weeks and months," the Red Cross said in a statement.

"More than 10 million people are already in need of assistance in the country. More than three million people are already internally displaced," it said.

"If there is the predicted upsurge in violence, then the figure of internally displaced could dramatically increase."

This comes as Iraqi government forces march towards Mosul - held by IS since June 2014 - after a string of victories against the militants in other parts of the country.

Mosul, which has been under Islamic State control since June 2014, was once home to some two million people, but more than half have left since the conflict began.

Last month, government forces declared victory in Fallujah after pushing out the militants during an offensive that forced tens of thousands of people to flee.

But the battle for Mosul - a much larger city - is expected to see a stark increase in internally displaced civilians, prompting the Red Cross to request an additional $17.1 million for its Iraq budget to help provide assistance to displaced people in the country.

IS overran large areas north and west of Baghdad in 2014, but has since lost significant ground to Iraqi forces backed by US-led air strikes.