Sunni fighters seized a border post on the Iraq-Syria frontier, security sources said on Saturday, smashing a line drawn by colonial powers almost a century ago and potentially creating an Islamic Caliphate from the Mediterranean Sea to Iran.

The militants, led by the Islamic State in Iraq and the Levant (ISIL), first moved into the nearby town of al-Qaim on Friday, pushing out security forces, the sources said.

Once border guards heard that al-Qaim had fallen, they left their posts and militants moved in, the sources said.

Sameer al-Shwiali, the media adviser to the commander of Iraq's anti-terrorist squad, told Reuters that the Iraqi army was still in control of al-Qaim.

Al-Qaim and its neighbouring Syrian counterpart Albukamal are on a strategic supply route. A three-year civil war in Syria has left most of eastern Syria in the hands of Sunni militants, including the Albukamal-Qaim crossing.

The Albukamal gate is run by al Qaeda's official Syria branch, the Nusra Front, which has clashed with ISIL but has also agreed to localised truces when it suits both sides.

The head of the Syrian Observatory for Human Rights monitoring group, Rami Abdulrahman, said ISIL has pushed the Nusra Front out from many areas of eastern Syria in the past few days and their capture of al-Qaim will allow them to quickly move to the Syrian side.

ISIL already controls territory around the Abukamal gate, effectively pinching the Nusra Front between its forces in Syria and those in neighbouring Iraq, said Abdulrahman, who tracks the violence.

With stunning speed, ISIL, an offshoot of al Qaeda, has captured swathes of territory in northwest and central Iraq, including the second city, Mosul. They have seized large amounts of weaponry from the fleeing Iraqi army and looted banks.

The fighting has divided Iraq along sectarian lines. The Kurds have expanded their zone in the northeast to include the oil city of Kirkuk, which they regard as part of Kurdistan, while Sunnis have taken ground in the west.

The Shi'ite-led government has mobilised militia to send volunteers to the front lines.

President Barack Obama has offered up to 300 US special forces advisers to help the Iraqi government recapture territory seized by ISIL and other Sunni armed groups across northern and western Iraq.

But he has held off granting a request for air strikes to protect the government and renewed a call for Iraq's long-serving Shi'ite prime minister, Nuri al-Maliki, to do more to overcome sectarian divisions that have fuelled resentment among the Sunni minority.

In Baghdad's Shi'ite slum of Sadr City, thousands of fighters wearing military fatigues marched through the streets.

They carried rocket-propelled grenades, semi-automatic rifles and trucks had mounted long-range rockets, including the new 3-metre "Muqtada 1" missile, named after Shi'ite cleric Muqtada Sadr, who has tens of thousands of followers.

Sadr has yet to throw his fighters into the recent wave of fighting but has criticised Maliki for mishandling the crisis.

"These brigades are sending a message of peace. They are the brigades of peace. They are ready to sacrifice their souls and blood for the sake of defending Iraq and its generous people," a man on a podium said as the troops marched by.-Reuters