The US embassy in Baghdad has warned the risk of the Mosul Dam collapsing is "serious and unprecedented" and has urged people to be ready to evacuate.
Maintenance work was disrupted after the dam was briefly seized by militants from so-called Islamic State in 2014.
If the dam burst, floodwaters could kill 1.47 million Iraqis living along the River Tigris, the embassy said.
Iraq's prime minister has said precautions are being taken, but that such a scenario is "highly unlikely".
The dam, Iraq's largest has suffered from structural flaws since its completion in 1984, with the water constantly eating away at the soluble gypsum base on which it is built.
To counter the erosion, engineers need to drill holes in the gypsum and fill them with a cement grout mixture six days a week.
IS only controlled the dam for 11 days, but many of the people working at the dam did not return after it was recaptured and regular maintenance did not resume.
'Abundance of caution'
The statement issued by the US embassy on Sunday it had "no specific information that indicates when a breach might occur" in the Mosul Dam.
"But out of an abundance of caution, we would like to underscore that prompt evacuation offers the most effective tool to save event of a breach," it added. "Proper preparation could save many lives."
Some models estimate that Mosul, which has been controlled by IS since June 2014, could be inundated by as much as 21m (70ft) of water within one to four hours of a catastrophic breach.
The embassy also published a factsheet that said approximately 500,000 to 1.47 million Iraqis living along the River Tigris in areas at highest risk probably would not survive unless the 482km (300-mile) long flood zone was evacuated.
It recommended that Mosul residents would need to move at least 6km (3.5 miles) from the banks of the Tigris and avoid all rivers and riverbeds feeding into it.
Residents of Tikrit, which would be hit between 24 and 48 hours later, probably could reach safety by moving at least 5km from the riverbank, while those in the central city of Samarra would need to be 6.5km away, according to the factsheet.
Some parts of the capital Baghdad, including the international airport, would also be flooded, with standing water likely to remain for weeks to months.
Much of the territory projected to be damaged by a dam breach is contested or controlled by IS, which the embassy said would likely mean a directed evacuation was unlikely and that some people might not be able to escape.
The embassy said it welcomed Iraqi Prime Minister Haider al-Abadi's commitment to undertake all necessary measures to finalise and implement a contract with the Italian engineering firm Trevi Group in order to address the structural integrity of Mosul Dam.
Some 450 Italian troops will be deployed to protect the dam during the urgent repair work, which is expected to take 18 months.
US Defence Secretary Ash Carter also said on Monday that Iraqi government forces would lead the coming battle for Mosul, and that the coalition expected to provide types of support that were offered during the offensive on Ramadi last year but were not needed, such as logistics and bridging.