About 800 Iraqi forces backed by US warplanes are waging a battle to retake the western town of Al-Baghdadi from Islamic State jihadists, a US military commander said Monday.

Kurdish militia, meanwhile, rebuffed an attempt by the IS group on Sunday night to recapture an Iraqi town standing on a crucial supply route to the northern city of Mosul, the commander said.

Lieutenant General James Terry, who oversees the US-led war effort against IS, told reporters the jihadists had been "halted" across Iraq and that it was now only able to launch smaller-scale attacks.

Terry, who is headquartered in Kuwait, said that while the IS militants are under mounting pressure, the Iraqi army was improving.

"The capabilities that we're seeing in the Iraqi security forces are growing," the general said.

"At the same time, what we're not seeing on the part of Daesh (IS) is as important also. We're not seeing those broad counter-offensives" that they staged previously, he said.

Iraqi army and commando units, as well as tribal fighters, were currently carrying out an operation to retake the small town of Al-Baghdadi which IS jihadists had seized about a week ago, according to Terry.

The counter-attack, dubbed "Lion's Revenge," involved "well over 800" Iraqi forces, including mechanised units.

The town is located near the Iraqi army's Al-Asad base, where 300 US troops are stationed to advise and train local forces.

A group of about 20-25 IS fighters -- including several suicide bombers -- staged an attack on the Asad base this month but the assault was quickly crushed.

- Heavy losses -

Coalition warplanes have carried out about 10 "precision strikes" against IS in recent days to support the Iraqi operation near Al-Baghdadi, Terry said.

"I'm pretty confident that the Iraqis will retake this. I think they have the right forces out there to do it," he said at a briefing at the US Army base of Camp Arifjan in neighbouring Kuwait.

Terry also said the IS jihadists on Sunday night staged an unsuccessful bid to recapture the town of Kaske, which straddles a strategic route to Mosul -- an IS stronghold.

Kurdish forces repulsed the attack backed by US-led aircraft, Terry said.

He said the IS suffered heavy losses, with an estimated 127 fighters killed.

Kurdish forces seized the key stretch of highway linking Mosul to northeastern Syria last month. And the loss of the area has created logistical headaches for the jihadists, Terry said.

Now "what they have to do is travel off-road", he said.

About 3,000 US troops are currently deployed in Iraq, providing advice and training to Iraqi and Kurdish forces.

Terry spoke shortly before taking part in a meeting of top generals and diplomats convened by new US Defence Secretary Ashton Carter to review the state of the war effort against the jihadists.