BAGHDAD—Militants with the Islamic State allegedly used explosives containing chlorine gas while attempting to overrun a town north of the Iraqi capital last month, sickening about 25 soldiers and civilians, two Iraqi officials said Friday.

The alleged chemical attack, which occurred Sept. 15 in the town of Dhuluiya, would mark the first known time the radical insurgency has employed chemicals in their more than five-month-old offensive in Iraq, which has captured large swaths of the nation.

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