Jihadists are pushing toward Baghdad after capturing a town just hours to the north, as the US mulls air strikes to bolster Iraq's collapsing security forces.
With militants threatening the capital, forces from Iraq's autonomous Kurdish region on Thursday took control of the disputed northern oil hub of Kirkuk to protect it from jihadist attack.
Iranian President Hassan Rouhani meanwhile has warned that Tehran would combat "terrorism" in neighbouring Iraq.
Fighters from the Sunni Muslim Islamic State of Iraq and the Levant (ISIL) have spearheaded a major offensive, overrunning the northern province of Nineveh and parts of Kirkuk and Salaheddin provinces, and also moving into Diyala.
On Thursday they were advancing on Baghdad, after seizing the town of Dhuluiyah just 90km away.
Militants also seized three villages in Diyala province, which abuts Baghdad to the east, expanding the offensive, officers said.
ISIL spokesman Abu Mohammed al-Adnani promised the group would drive on to Baghdad and Karbala, a city southwest of the capital that is one of the holiest sites for Shi'ite Muslims, in a statement carried by jihadist websites.
Washington is considering several options for offering military assistance to Baghdad, including drone strikes, a US official told AFP on condition of anonymity.
Resorting to such aircraft would mark a dramatic shift in the US engagement in Iraq, after the last American troops pulled out in late 2011.
State Department spokeswoman Jen Psaki said the US was committed to "working with the Iraqi government and leaders across Iraq to support a unified approach against ISIL's continued aggression."
But there is no current plan to send US troops back into Iraq, where around 4500 American soldiers died in the bitter conflict.
And British Foreign Secretary William Hague said there was "no question" of British troops being sent back to Iraq.
The UN Security Council has called crisis talks for Thursday.
In Tehran, President Rouhani went live on television to denounce the "extremist, terrorist group that is acting savagely" in Iraq and warned that Iran would not tolerate "this violence and terror."
He said he would later meet the Supreme National Security Council, which would have to approve any military support Tehran might want to provide to Baghdad.
The militants overran Iraq's second city Mosul on Tuesday before taking control of its surrounding province Nineveh and sweeping into Kirkuk, Salaheddin and Diyala provinces.
They encountered little effective resistance from security forces, some of whom discarded their uniforms and joined tens of thousands of fleeing civilians.
The gunmen did not enter Kirkuk city, but the army withdrew from positions in the surrounding province and their places have been taken by members of the Kurdish peshmerga security forces, according to Kirkuk Governor Najm al-Din Karim.
The first sign of effective resistance to the militants came Wednesday when they were repulsed in heavy fighting as they tried to enter Samarra, a mainly Sunni Arab city that is home to a shrine revered by the country's Shi'ite majority.
The International Organisation for Migration has estimated that over 500,000 people have been displaced in and around Mosul alone.
Known for its ruthless tactics and suicide bombers, ISIL is arguably the most capable force fighting President Bashar al-Assad inside Syria as well as the most powerful militant group in Iraq.
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