Iran-backed Shia militias have been sent by the Iraqi government to Ramadi to recapture the city seized by Islamic State (ISIS) militants on May 17.
About 500 people are reported to have died when the Iraqi military abandoned positions in Ramadi – only 70 miles West of Baghdad.
A regional government official spoke of people fleeing Ramadi, the capital of Anbar province, “in great numbers”.
The US has said it is confident the capture of Ramadi can be reversed.
Speaking in South Korea, Secretary of State John Kerry said: “I am convinced that as the forces are redeployed and as the days flow in the weeks ahead that’s going to change.”
The Shia militias, known as the Popular Mobilization (Hashid Shaabi), were key to the recapture from ISIS of another city, Tikrit, north of Baghdad, in April. But their use has raised concern in the US and elsewhere.
The militias pulled out of Tikrit following reports of widespread violence and looting.
Meanwhile, the Iranian Defense Minister, Hossein Dehghan, has arrived in Baghdad on a visit arranged before the latest developments in Ramadi.
The police and military made a chaotic retreat from Ramadi, which has been contested for months, after days of intense fighting.
A statement purportedly from ISIS said its fighters had “purged the entire city”. It said ISIS had taken the 8th Brigade army base, along with tanks and missile launchers left behind by troops.