Iraqi troops "eliminated and smashed Daesh terrorists" in al-Ayadia district, about 10km northwest of Tal Afar, where the militants fled last week, al-Abadi said in a statement. Daesh is the Arabic acronym for IS.
With Tal Afar liberated, all of Nineveh province - the first area IS militants captured in a 2014 blitz - "is in the hands of our brave troops," al-Abadi said.
"To Daesh criminals we say: Wherever you are we will come to liberate and you have to choose only death or surrender," he said.
Iraqi officials often declare areas liberated before the fighting has completely ended, and the militants have been known to carry out surprise counterattacks.
US-backed Iraqis troops launched the operation to retake Tal Afar early last week, a month after it declared the northern city of Mosul, its second largest, to be fully liberated. Tal Afar is about 150km from Syria's border and it was among the last IS-held towns in Iraq.
Iraqi forces have driven IS from most of Iraq's major towns and cities seized by the militants in the summer of 2014, including Mosul, which was retaken after a gruelling nine-month campaign.
IS stills control the northern town of Hawija as well as towns in western Iraq near Syria.
