As many as 500,000 people have been forced to flee the Iraqi city of Mosul after hundreds of Islamist militants took control of it, the International Organization for Migration (IOM) says.
Troops were among those fleeing as the jihadists from the ISIS group took the city and much of Nineveh province.
The head of the Turkish mission in Mosul and dozens of consulate officials have been seized.
PM Nouri Maliki has asked parliament to declare a state of emergency.
The US said the development showed ISIS was a threat to the entire region.
ISIS - the Islamic State of Iraq and the Levant, which is also known as ISIL - is an offshoot of al-Qaeda.
It now controls considerable territory in eastern Syria and western and central Iraq, in a campaign to set up a militant enclave straddling the border.
Residents of Mosul - Iraq's second city - said jihadist flags were flying from buildings and that the militants had announced over loudspeakers they had "come to liberate" the city.
"The situation is chaotic inside the city, and there is nobody to help us," said government worker Umm Karam. "We are afraid."
ISIS in Iraq
- The Islamic State of Iraq and the Levant (ISIS) has 3,000 to 5,000 fighters, and grew out of an al-Qaeda-linked organisation in Iraq
- ISIS has exploited the standoff between the Iraqi government and the minority Sunni Arab community, which complains that Shia PM Nouri Maliki is monopolising power
- It has already taken over Ramadi and Falluja, but taking over Mosul is a far greater feat than anything the movement has achieved so far, and will send shockwaves throughout the region
- The organisation is led by Abu Bakr al-Baghdadi - an obscure figure regarded as a battlefield commander and tactician. He was once the leader of al-Qaeda in Iraq, one of the groups that later became ISIS.
Staff working for the IOM in Mosul say that all official buildings there have been taken over, including police and military bases, and the airport.
A Turkish official said 48 people, including the head of the diplomatic mission, had been seized in Mosul.
Many police stations were reported to have been set on fire and hundreds of detainees set free.
"The army forces threw away their weapons, changed their clothes, abandoned their vehicles and left the city," Mahmud Nuri, a resident fleeing Mosul, told the AFP news agency.
There has been a large number of civilian casualties, the IOM says, and some mosques have been converted into clinics to treat the injured.
Late on Tuesday, ISIS militants were also reported to have taken the nearby town of Baiji, home to Iraq's largest oil refinery, but they now appear to have withdrawn in the face of army and police reinforcements.
US state department spokeswoman Jen Psaki said the situation in Iraq was "extremely serious" and that the US supported "a strong, co-ordinated response to push back against this aggression".
A spokesman for UN Secretary-General Ban Ki-moon said he was "gravely concerned" by the situation.
But the BBC's Jim Muir says everything that has happened in Syria indicates that the West would not want to get involved in another Middle East quagmire.
Heading to Kurdistan
Sources have told BBC Arabic that the displaced Mosul residents are heading to three towns in the nearby region of Kurdistan where authorities have set up temporary camps for them.
Kurdistan Prime Minister Nechirvan Barzani issued a statement appealing to the UN refugee agency for help.
In a televised announcement, Mr Maliki said that security forces had been placed on a state of "maximum alert".
He also said he had asked parliament to declare a state of emergency - which would broaden arrest powers and allow curfews to be imposed - and a "general mobilisation" of civilians.
Athil al-Nujaifi, the governor of Nineveh province where Mosul is located, has accused Mr Maliki of ignoring his advice on the security situation and instead relying on information from military in Baghdad.
Mr Nujaifi, a prominent critic of the prime minister, said he had begun steps to rebuild the security forces to retake the city from the militants.
Meanwhile Foreign Minister Hoshyar Zebari says Iraq faces a "serious, mortal threat".
Speaking on the sidelines of an EU-Arab League meeting in Athens, he said: "There has to be a quick response to what has happened."
ISIS has significantly increased its reach within the past year.
Parts of Ramadi, the capital of Anbar province, and much of the nearby city of Falluja have been under its control since late December.
ISIS has also been informally controlling much of Nineveh province for months, and in the past week has attacked other areas of western and northern Iraq, killing scores of people.
The Iraqi government is struggling with a surge in sectarian violence that killed almost 800 people, including 603 civilians, in May alone, according to the UN. Last year, more than 8,860 people died.