Islamist extremists have seized control of much of Iraq's second biggest city, Mosul, and the surrounding province, freeing more than 1,000 prisoners, sending troops and residents fleeing and crippling Baghdad's efforts to quell a fast-spreading insurgency.

Mosul fell early on Tuesday after four days of advances by the Islamic State of Iraq in Syria (Isis) and rapid capitulation by the Iraqi military, whose members reportedly abandoned their posts as the jihadists advanced.

An Iraqi armed soldier runs for cover during clashes with militants in Mosul. Photograph: AP

By nightfall there were also reports of Isis forces moving towards the ethnically sensitive city of Kirkuk and consolidating positions throughout Nineveh province, which borders the Kurdish north and Arab centre of the country.

The US said it was "deeply concerned" about the developments in Mosul, and described the situation as "extremely serious". The state department urged a "strong, coordinated response to push back" against the attack.

Spokeswoman Jen Psaki said: the insurgent group benefitted from the civil war in Syria and claimed it transferred recruits and resources to Iraq from there. "This growing threat exemplifies the need for Iraqis from all communities to work together to confront this common enemy and isolate these militant groups from the broader population," she said.

The day's developments mean Isis now has effective control over three cities, including Falluja and Ramadi in neighbouring Anbar. All three were centres of the insurgency against coalition forces and more than 30% of US lives were lost there during the Iraq war.

The US claim at the time that it had "strategically defeated" al-Qaida has repeatedly been proved to be false over recent months as jihadists have re-entrenched themselves in former battlegrounds. So too has the Iraqi government claim that its forces have the means to oust them. Officials have told the Guardian that casualty rates among military ranks are now higher than 2,500. The toll is despite no serious attempts being made to retake lost ground.

Iraq's embattled government said it would arm civilians and ask the parliament to declare a state of emergency. It also said it would reorganise military forces, many of which were armed and trained by the US until 2011. Officials suggested a collaboration between tribal leaders and the US military that quelled an insurgency in 2007 might be used as a template.

No tribal figure was prepared to intervene on Tuesday with residents reporting large numbers of prisoners in yellow jailhouse garb wandering the streets of Mosul, some being greeted by the jihadists who had freed them. Residents reported that hundreds of extremists carrying weapons were roaming the city with impunity.

People fleeing the violence queue at a checkpoint near Mosul. Photograph: Safin Hamed/AFP/Getty Images

"All of Nineveh province fell into the hands of militants," parliament speaker Osama al-Nujaifi told a press conference in Baghdad. He said that the extremists were heading south towards the home province of Saddam Hussein.

"The city fell like a plane without an engine," said a Mosul businessman who fled to Erbil in the Kurdish north late on Tuesday. "They were firing their weapons into the air, but no one was shooting at them."

The rapid organisation and mobility of Isis has shocked leaders across the region. The group gathered momentum in late 2012 on the battlefields of northern Syria, where its fortunes have waned in recent months during a fight with Islamist and moderate forces in Syria's opposition which have succeeded in ousting them from Aleppo and Idlib.

Despite losing land, the group has carved out a cross-border swath of influence in Syria from al-Bab, east of Aleppo, through the lawless eastern deserts and into Iraq's Anbar province.

Isis has also stepped up the bombing campaigns it frequently launches in an attempt to disrupt Iraq's Shia power base and to re-establish a caliphate governed by fundamentalist Islamic law.

With its authority steadily crumbling, Baghdad has turned to Washington, asking the Obama administration to provide it with missiles and artillery. Iraq has not sought a return of US forces and Obama has been deeply reluctant to commit to sending troops back to the region. The events in Mosul – where militants released prisoners from the city's jails and are reported to have raised the group's flags above civic buildings – appear to have caught the prime minister, Nouri al-Maliki, off guard.

Maliki has been trying for the past six weeks since national elections to assemble a coalition that would secure him a third term as prime minister.

In a statement released late on Tuesday, Maliki said he would create a leadership group responsible for sourcing and arming residents. He offered no details of when the arming might take place, or who might receive weapons.

Maliki had positioned himself as the only Iraqi politician who could stand up to a resurgent Isis. However, his forces have been unable to win back Falluja or Ramadi and seem increasingly impotent as the insurgency gathers steam.

Iraqi officials believe there are about 6,000 Isis militants in the country, although the number could be several thousand higher, with members regularly crossing the porous border with Syria.

The group's leadership is almost exclusively made up of Iraqis, battle-hardened by a nearly decade-long insurgency against US forces and a gruelling civil war against the country's Shias. However, its rank and file hail from all corners of the Arab world, as well as Europe, south Asia and south-east Asia.

Isis played a prominent role in Syria's civil war throughout last year, subverting both moderate and Islamist groups lined up against Bashar al-Assad in the north of the country. Its influence, though, was sharply curtailed this year when opposition groups ousted it from Idlib and Aleppo, two areas where it had been most active. Ever since, Isis leaders have consolidated their power base in the eastern city of Raqqa while intensifying their operations in Iraq.