President Barack Obama said he had authorised limited US airstrikes to blunt the onslaught of Islamic militants in northern Iraq and began military airdrops of humanitarian supplies to besieged religious minorities to prevent a "potential act of genocide."

Speaking after meetings with his national security team, Obama - in his most significant response to the Iraq crisis - said he approved "targeted" use of air power to protect US personnel if Islamic State militants advance further toward the Kurdish capital Arbil or threaten Americans anywhere in the country.

The airstrikes would be the first carried out by the US military in Iraq since the withdrawal of its forces at the end of 2011, but Obama insisted he would not commit ground forces and had no intention of letting the United States get dragged back into a war there.

Obama took action amid international fears of a humanitarian catastrophe engulfing tens of thousands of members of Iraq's minority Yazidi sect driven out of their homes and stranded on Sinjar mountain under threat from rampaging militants of Islamic State, an Al Qaeda splinter group. Many Iraqi Christians have also fled for their lives.

"We can act carefully and responsibly to prevent a potential act of genocide," Obama told reporters at the White House.

Obama was responding to urgent appeals from Iraqi and Kurdish authorities to help cope with an unfolding humanitarian crisis as the militants surged across northern Iraq.

It was unclear, however, whether the measures announced by Obama would be enough to halt the militant advance or shift the balance on the battlefield in favor of embattled Iraqi and Kurdish forces.

Reuters photographs showed what appeared to be Islamic State fighters controlling a checkpoint at the border area of the Kurdish semi-autonomous region, little over 30 minutes' drive from Arbil, a city of 1.5 million that is headquarters of the Kurdish regional government and many businesses.

The fighters had raised the movement's black flag over the guard post. However, a Kurdish security official denied that the militants were in control of the Khazer checkpoint, and the regional government said its forces were advancing and would "defeat the terrorists," urging people to stay calm.

With the refugees on the mountaintop desperately short of food, water and medicine, US aircraft began dropping emergency aid in the area shortly before Obama spoke on Thursday.

"We intend to stay vigilant and take action if these terrorist forces threaten our personnel or facilities anywhere in Iraq, including our consulate in Arbil and our embassy in Baghdad." he said.

Obama sent in a small number of US military advisers in June to help the Iraqi government's efforts to fend off the Islamic militant offensive, but he was reluctant to take direct military action. He had put the onus on Iraq's Shi'ite Prime Minister Nuri Al-Maliki to form a more inclusive government to help defuse the crisis.

Washington's calculus appeared to shift after Islamic State, which routed the Iraqi military in the north and seized a broad swath of territory in recent months, made recent gains against Kurdish forces and moved toward Arbil, capital of the Kurdish semi-autonomous region.

Obama's decision to deepen US re-engagement in Iraq came after urgent deliberations by a president who won the White House in 2008 on a pledge to disentangle the United States from the long, unpopular war there.

Until this week, most of Kurdistan had been protected from militants by its own armed forces, called the pesh merga. Hundreds of thousands of Iraqis fleeing the Islamists, including Christians, Yazidis and others, have taken refuge in the Kurdish area.

The Islamic State's Sunni militants have swept across northwestern Iraq in recent weeks. The Islamic State views as infidels Iraq's majority Shi'ites and minorities such as Christians and Yazidis, a Kurdish ethno-religious community. - Reuters