Italy is to send 450 troops to defend Iraq's strategic Mosul dam, near the city occupied by Islamic State group fighters, Prime Minister Matteo Renzi announced.

The dam on the Tigris river, built by a German-Italian consortium in the 1980s and in which Italian company Trevi still has an interest, is a vital water and power source for Mosul, Iraq's largest northern city.

"The call (to protect the dam) was made by an Italian company... and we will send 450 of our men there to help protect it alongside the Americans," the prime minister said on national television late Tuesday.

Mosul, Iraq's second city, has been occupied by IS jihadists since June 2014. Kurdish forces, backed by US air strikes, retook the dam from IS in August 2014.

The dam, which provides water and energy to over a million people, "is in the heart of a dangerous zone, on the border with IS. It is seriously damaged and risks collapse," Renzi warned.

If the dam is destroyed by fighting it could unleash major flooding in Mosul and the capital Baghdad, 400 kilometres (250 miles) to the south.

Italian construction and energy group Trevi has secured a $2.0 billion (1.83 billion euro) contract to shore up the dam.

So far the security situation has been too precarious for those works to begin.

The 450 Italian troops will be in addition to the 750 already on the ground in Iraq as part of international efforts.