ISLAMIC State extremists have reportedly slaughtered at least 400 people in the ancient Syrian city of Palmyra, as the US accused Iraqi forces of having “failed to fight” off the terrorist group.

Witnesses said the streets of Palmyra are strewn with the mutilated bodies of state employees, including the head of the nursing department and her family, along with “government loyalists”.

“The terrorists have killed more than 400 people ... and mutilated their bodies, under the pretext that they cooperated with the government and did not follow orders,” Syria’s state news agency said, according to Reuters.

The Syrian Observatory for Human Rights says some of the victims were beheaded, adding that 300 soldiers were killed before the city was captured on Wednesday.

“A bigger number of troops have disappeared and it is not clear where they are,” spokesman Rami Abdulrahman said.

IS supporters have shared videos online showing extremists searching government buildings for troops and tearing down images of President Bashar al-Assad.

Harrowing pictures have also emerged of Syrian army troops captured during fierce fighting in the days before IS seized Palmyra.

Analysts said the capture of the historic city potentially put IS in a position to mount offensives on the capital Damascus and third city Homs.

Pentagon: Iraqi forces “showed no will to fight” ISIS

Meanwhile, Pentagon chief Ashton Carter has accused Iraqi forces of having “failed to fight” in Ramadi, which has fallen to IS militants.

The jihadists took control of the strategic city, the capital of Anbar province a week ago, in Baghdad’s worst defeat in almost a year.

Carter said the city fell because Iraqi forces — despite strength in numbers — lacked the will to defend themselves.

“What apparently happened was the Iraqi forces showed no will to fight. They were not outnumbered, and they vastly outnumbered the opposing force, and they failed to fight and withdrew from the site,” Carter told CNN.

“That says to me, and I think to most of us, that we have an issue with the will of the Iraqis to fight ISIL and defend themselves,” he said, using an alternative name for the group.

Carter said training and equipping the army was of little use if the troops lacked necessary morale.

“We can give them training and we can give them equipment and we can’t obviously give them the will to fight,” he said.

But he remained optimistic the situation could improve.

“If we give them training and equipment and support and some time, I hope they will develop the will to fight because only if they fight can ISIL remain defeated.”

Iraqi forces on Saturday retook territory from the Islamic State group east of Ramadi, their first counter-attack since the jihadists’ capture of the city.

IS takes control of a border crossing

IS has also taken full control of a border crossing between Iraq and Syria, tightening its grip on the heart of its self-proclaimed caliphate.

The move has given the group control of the two main roads between Syria and Iraq’s province of Anbar, as the jihadists pressed their most devastating offensive in months.

The jihadists seized Al-Walid border post early on Sunday when Iraqi government forces pulled back to a nearby crossing with Jordan. IS had taken the Syrian side of the crossing on Thursday.

“There was no military support for the security forces and there weren’t enough of them to protect the crossing,” said Suad Jassem, the head of Anbar’s border commission.

“Daesh (IS) now controls both sides of both crossings,” she said, referring to another crossing between Anbar and Syria that the jihadists seized last year.

The surge by a group described as the most violent in modern jihad raised further questions about the efficiency of the US-led coalition’s eight-month air campaign.

Coalition warplanes have conducted more than 3000 strikes in Iraq and Syria since August 2014 and dozens more were carried out in recent days in a bid to contain the rampant jihadists.

There were seven in Anbar alone in a period of 24 hours straddling May 22-23 as Iraqi government and allied forces began to claw back territory from IS east of Ramadi.

On Saturday, Iraqi forces retook Husaybah, a rural town in the Euphrates Valley seven kilometres east of Ramadi.

The area’s most prominent Sunni tribal leader, Sheikh Rafia Abdelkarim al-Fahdawi, deployed his forces, whose knowledge of the terrain is key, alongside fighters from the Hashed al-Shaabi, an umbrella for Shi’ite militia and volunteers.

A police colonel said the Husaybah operation also involved local and federal police, and the interior ministry’s rapid intervention force as well as the army.

Swift action was seen as essential to prevent IS from laying booby traps across Ramadi, which would make any advance in the city more risky and complicated.

Iraqi forces were also battling IS on other fronts, including at the Baiji oil refinery, about 200km north of Baghdad.