Sunni militants have seized the northern Iraqi city of Tal Afar, officials and residents say.
Militants led by ISIS - the Islamic State in Iraq and the Levant - captured key cities including Mosul and Tikrit last week, but some towns were retaken.
UN human rights chief Navi Pillay said the "apparently systematic series of executions [of non-combatants] almost certainly amounted to war crimes".
The US earlier announced it might use drone strikes to halt the ISIS advance.
"They're not the whole answer, but they may well be one of the options that are important," said US Secretary of State John Kerry.
The Pentagon said US officials were also open to holding direct talks with Iran over Iraq, but there was "no plan to co-ordinate military activity" between the two countries.
Iranian President Hassan Rouhani earlier said he would consider co-operation if the US took action.
The USS George HW Bush aircraft carrier has already been deployed to the Gulf, accompanied by two more warships. But Washington says no US troops will be deployed on the ground.
Britain reiterated on Monday that it had no plans for military intervention in Iraq.
Analysis: Jim Muir, BBC News, Irbil
One reason Tal Afar was important for the government to hold was that the city was the state's only outpost in the entire province of Nineveh, which fell to the Sunni militants last week as the army collapsed.
It is also strategically significant, straddling the main highway from Mosul, the provincial capital, to the Syrian border.
However, assuming Tal Afar has indeed fallen to the militants, it does not mean they have a direct link to Syria - the border crossing at Rabia is controlled on the eastern side by Iraqi Kurdish Peshmerga fighters, and on the western side by the Popular Protection Units (YPG), the armed wing of the Syrian Kurdish Democratic Union Party (PYD), which is fiercely hostile to ISIS.
Tal Afar is important for other reasons too. Most of the areas through which the Sunni militants swept last week were largely Sunni populated. Tal Afar has a big Shia community, from the Turkmen minority, perhaps one reason why it held out longer than any other town in Nineveh.
Some observers believe it is important for Iran - which sees itself as the custodian of the Shia - that Tal Afar should not be allowed to fall, and that they would sooner or later wreak revenge, especially if abuses were committed during or after its capture.
Fighting in Tal Afar began on Sunday, with mortar shelling of some districts as militants tried to enter the city in Nineveh province.
Tal Afar, which has a mixed Sunni and Shia population, lies between Mosul and the Syrian border.
The city of 200,000 people was taken just before dawn on Monday, Mayor Abdulal Abdoul told the Associated Press news agency.
Eyewitnesses said militants in pick-up trucks mounted with machine guns and flying black jihadist banners were roaming the streets as gunfire rang out.
But the government insists it still largely controls the town and that ISIS fighters would be swiftly dealt with, says the BBC's Jim Muir in northern Iraq.
The government also announced it had "regained the initiative" against an offensive by Sunni rebels.
The defence ministry released footage on Monday which it said was of air strikes on ISIS targets north of Baghdad, including Mosul and Samarra provinces.
Earlier, Iraqi army spokesman Lt Gen Qassim Ata said the military had scored successes against the militants in several areas, killing 279 of them. The figure could not be independently verified.
Government forces were also reported to be building up in the city of Samarra, north of Baghdad, ready for a counter-offensive on Tikrit.
ISIS in Iraq
- The Islamic State in Iraq and the Levant (ISIS) has 3,000 to 5,000 fighters, and grew out of an al-Qaeda-linked organisation in Iraq
- Joined in its offensives by other Sunni militant groups, including Saddam-era officers and soldiers, and disaffected Sunni tribal fighters
- ISIS has exploited the standoff between the Iraqi government and the minority Sunni Arab community, which complains that Shia Prime Minister Nouri Maliki is monopolising power
- The organisation is led by Abu Bakr al-Baghdadi, an obscure figure regarded as a battlefield commander and tactician
Ms Pillay said hundreds of non-combatants may have been summarily executed over the past five days, including members of the security forces who had surrendered or been captured.
The UN is looking into the authenticity of photos posted online by Sunni militants that appear to show fighters massacring Iraqi soldiers.
In the scenes, the soldiers are seen being led away and lying in trenches before and after their "execution" in Salahuddin province.
Footage has also emerged purporting to show ISIS fighters taunting captured troops with threats of decapitation.
The Iraqi military earlier said the pictures were real, but their authenticity has not been independently confirmed.
The US condemned them as "horrifying".
If the photographs are genuine, this would be by far the biggest single atrocity since the time of the American-led invasion of Iraq in 2003.
The US has begun evacuating some diplomatic staff from Baghdad, moving them to Kurdish-controlled territory in the north-east and to Basra in the south.
The UN confirmed it had also moved 58 of its personnel from Baghdad to Amman in neighbouring Jordan, adding that more relocations were possible.
An estimated 500,000 people have been displaced internally as a result of recent fighting in Mosul.