Mosul Dam in northern Iraq, the country's largest, is at now at a "higher risk" of failure that could devastate areas to its south, according to a US assessment released by the Iraqi parliament.

The dam was built on an unstable foundation that continuously erodes, and a lapse in maintenance after the Islamic State jihadist group briefly seized it in 2014 weakened the already flawed structure.

"All information gathered in the last year indicates Mosul Dam is at a signficantly higher risk of failure than originally understood," said the assessment from the US Army Corps of Engineers, cited in an Iraqi parliamentary report on Monday.

And it "is at a higher risk of failure today than it was a year ago," it said.

Since the dam's completion in 1984, the Iraqi government has sought to shore up the foundation by injecting mortar-like grout into cavities that develop under the structure.

A US officer said the jihadists chased off the workers and stole equipment from the dam in 2014, but grouting has since been resumed.

"The reduction in grouting capacity for the past year has almost certainly resulted in an unprecedented level of untreated voids in the foundation from the continued dissolution and erosion of the geology," according to the US assessment, which was dated January 30.

Iraq said at the start of February that it has awarded Italian firm Trevi a contract to repair and maintain the dam, and Italy's premier has said the country would send 450 troops to defend the structure.

In 2007, the US ambassador to Iraq and the top American military commander in the country wrote a letter warning that the dam could fail with devastating results.

"A catastrophic failure of the Mosul Dam would result in flooding along the Tigris River all the way to Baghdad," the letter said.

"Assuming a worst case scenario, an instantaneous failure of Mosul Dam filled to its maximum operating level could result in a flood wave 20 metres (66 feet) deep at the city of Mosul," it said.