TIKRIT, Iraq (REUTERS) - The Islamic State in Iraq and Syria (ISIS) has captured most of a village south of Mosul despite losing control of its stronghold in the city, an Iraqi army officer and residents said, deploying guerrilla-style tactics as its self-proclaimed caliphate crumbles.

Prime Minister Haider al-Abadi declared victory over ISIS in Mosul on Monday (July 10), marking the biggest defeat for the hardline Sunni group since its lightning sweep through northern Iraq three years ago.

But the militants, armed with machine guns and mortars, have now seized more than 75 per cent of Imam Gharbi, a village on the western bank of the Tigris river some 70km south of Mosul, and reinforcements are expected, the Iraqi army officer said.

ISIS launched its attack on Imam Gharbi last week, in the kind of strike it is expected to deploy now as US-backed Iraqi forces regain control over cities the group captured during its shock 2014 offensive.

Stripped of Mosul, ISIS' dominion in Iraq will be reduced to mainly rural, desert areas west and south of the city.

ISIS also faces pressure in its operational base in the Syrian city of Raqqa, where US-backed Syrian Kurdish and Arab forces have seized territory on three sides of the city.

The campaign to retake Mosul from the militants was launched last October by a 100,000-strong alliance of Iraqi government units, Kurdish Peshmerga fighters and Shi'ite militias, with a US-led coalition providing key air and ground support.

Abadi's government in Iraq now faces a difficult task managing the sectarian tensions which enabled ISIS to gain supporters in the country among fellow Sunnis who say they were marginalised by the Shi'ite-led government.

The US-led coalition warned that victory in Mosul did not mark the end of the group's global threat. "Now it is time for all Iraqis to unite to ensure ISIS (Islamic State) is defeated across the rest of Iraq and that the conditions that led to the rise of ISIS in Iraq are not allowed to return again," Lieutenant General Stephen J. Townsend said in a statement.