"There is a grave danger that ISIL fighters will not only use such vulnerable people as human shields but may opt to kill them rather than see them liberated."

(Updates with statement from Zeid, adds quotes, concerns about revenge attacks)

GENEVA, Oct 21 (Reuters) - Islamic State militants have taken 550 families from villages around Mosul and are holding them close to Islamic State (ISIL) locations in the Iraqi city, probably as human shields, the U.N. human rights office said on Friday.

"We are gravely worried by reports that ISIL is using civilians in and around Mosul as human shields as the Iraqi forces advance, keeping civilians close to their offices or places where fighters are located, which may result in civilian casualties," U.N. High Commissioner for Human Rights Zeid Ra'ad al Hussein said in a statement.

"There is a grave danger that ISIL fighters will not only use such vulnerable people as human shields but may opt to kill them rather than see them liberated."

Iraqi and Kurdish forces, with air and ground support from the U.S.-led coalition, are pursuing operations to seize territory around Mosul in preparation for an offensive on the jihadists' last major stronghold in Iraq.

U.N. spokeswoman Ravina Shamdasani, citing "verified information" from local contacts, said 200 families were forced to walk to Mosul from Samalia village on 17 October, and another 350 families left Najafia village for Mosul on the same day.

"This would seem to indicate that the reason for these moves is to use them for the purposes of human shields," she said.

The office was also investigating "corroborated information" that Islamic State militants had killed 40 civilians in one village outside Mosul. She declined to give details.

Zeid said that Iraq must respect international law when screening civilians leaving areas controlled by Islamic State, a job that should only be done by army and police.

"We are urging the Iraqi authorities to take all possible steps to prevent armed groups operating alongside the Iraqi Security Forces from any form of revenge attack on civilians fleeing ISIL," he said.

"This issue remains a serious concern as these groups have reportedly subjected people fleeing conflict zones, particularly men and boys above 15 years of age, to threats, intimidation, physical violence, and even abduction and killing," he said. (Reporting by Tom Miles; Editing by Richard Balmforth)

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