Iraqi forces have captured the town of Hawija and the surrounding area from ISIL, the military said in a statement.
With the capture of Hawija, the Islamic State of Iraq and the Levant's last stronghold in northern Iraq, the only area that remains under control of the group in Iraq is a stretch alongside the western border with Syria.
Hawija is close to the oil-city of Kirkuk.
The offensive was carried out by US-backed Iraqi government troops and Iranian-trained and armed Shia paramilitary groups known as Popular Mobilisation Forces (PMF).
"The army's 9th armoured division, the Federal Police, the Emergency Response division and (…) Popular Mobilisation liberated Hawija," said a statement from the joint operations commander, Lieutenant-General Abdul Ameer Rasheed Yarallah, on Thursday.
Major General Raid Shaker Jawdat, commander of Iraq's Federal Police, said "the federal forces liberated the district of Hawija, the Hawija hospital as well as the Askari, Nidaa and Thawra neighbourhoods, and are in control of the centre of the province of Hawija in full".
Iraq launched an offensive on September 21 to dislodge ISIL (also known as ISIS) from the area north of Baghdad where up to 78,000 people were estimated to be trapped, according to the United Nations.
The groups continues to control the border town of al-Qaim and the region surrounding it.
They also hold parts of Syrian side of the border, but the area under their control is shrinking as they retreat in the face of two different sets of hostile forces - a US-backed, Kurdish-led coalition and Syrian government troops with foreign Shia militias backed by Iran and Russia.
ISIL's cross-border "caliphate" effectively collapsed in July, when US-backed Iraqi forces captured Mosul, the group's de facto capital in Iraq, in a grueling battle which lasted nine months.
The group's leader Abu Bakr al-Baghdadi, who declared the caliphate from Mosul in mid-2014, released an audio recording last week that indicated he was alive, after several reports he had been killed.
He called on his followers to keep up the fight despite the setbacks.
