By blowing up the Grand al-Nuri Mosque of Mosul and its famous leaning minaret, Isis has issued a "formal declaration of defeat," Iraq's Prime Minister has said.

Haider al-Abadi said the destruction was an admission the militants are losing the fight for Iraq's second largest city.

"Daesh's bombing of the al-Hadba minaret and the al-Nuri Mosque is a formal declaration of their defeat," Mr al-Abadi said, using the Arabic acronym for Isis.

Isis "terror gangs committed another historical crime by blowing up the al-Nuri mosque and its historical al-Habda minaret", the Iraqi military said in a statement.

Used as a human shield by Isis: "My family was blown pieces in the street"

The mosque was named after a noble who fought in the early crusades and had stood for more than 840 years.

The minaret, which leaned like Italy's Tower of Pisa, gave the landmark its popular name: al-Hadba, or the hunchback.

Also known as Mosul's Grand Mosque, it was where the Isis leader, Abu Bakr al-Baghdadi, declared a so-called Islamic caliphate in 2014 shortly after the militant group overran Mosul.

An Isis statement posted on the group's Amaq news service blamed the destruction on a US air strike, but the US-led coalition rejected the claim.

A spokesman said said the coalition was not carrying out air strikes in the area.

“As our Iraqi security force [ISF] partners closed in on the al-Nouri mosque, Isis destroyed one of Mosul and Iraq’s great treasures,” said Major General Joseph Martin, commanding general of the US-led coalition fighting Isis.

“This is a crime against the people of Mosul and all of Iraq, and is an example of why this brutal organisation must be annihilated,” said Major General Martin.

“The responsibility of this devastation is laid firmly at the doorstep of Isis, and we continue to support our Iraqi partners as they bring these terrorists to justice. However, the battle for the liberation of Mosul is not yet complete, and we remain focused on supporting the ISF with that objective in mind,” he added.

Iraqi military leaders had privately said they wanted to liberate the mosque in time for Eid al-Fitr, a festival to mark the Muslim holy month of Ramadan.

In pictures: Isis' weapons factories Show all 11 1 /11 In pictures: Isis' weapons factories In pictures: Isis' weapons factories A mortar round fin manufactured by Isis in Gogjali, Mosul, November 2016 Conflict Armament Research In pictures: Isis' weapons factories Isis rocket components discovered in Gogjali, Mosul, Iraq in November 2016 Conflict Armament Research In pictures: Isis' weapons factories Isis mortars discovered near Karamlais, Iraq, in November 2016 CAR In pictures: Isis' weapons factories An Isis rocket launch frame in Qaraqosh, November 2016 Conflict Armament Research In pictures: Isis' weapons factories A memo from Isis' COSQC on quality control at a manufacturing facility in Gogjali, Mosul, November 2016 Conflict Armament Research In pictures: Isis' weapons factories Electrically-operated initiators manufactured by Isis in forces Gogjali, Mosul, November 2016 Conflict Armament Research In pictures: Isis' weapons factories Isis mortar tubes at a manufacturing facility in Karamlais, November 2016 Conflict Armament Research In pictures: Isis' weapons factories An Isis mortar production facility discovered in Gogjali, Mosul, in November 2016 Conflict Armament Research In pictures: Isis' weapons factories An Isis weapons manufacturing facilities near Mosul in November 2016 Conflict Armament Research In pictures: Isis' weapons factories Stocks of French-manufactured Sorbitol, Latvian potassium nitrate and Lebanese sugar at an Isis weapons factory in Iraq Conflict Armament Research In pictures: Isis' weapons factories A destroyed Isis weapons facility in Qaraqosh, Iraq, November 2016 Conflict Armament Research

Isis fighters initially attempted to destroy the minaret in July 2014. The militants said the structure contradicted their fundamentalist interpretation of Islam, but Mosul residents converged on the area and formed a human chain to protect it.

The terror group has demolished dozens of historic and archaeological sites in and around Mosul, claiming they promoted idolatry.

The mosque sat on the southern edge of the Old City, the last Isis stronghold inside Mosul.

Iraqi forces launched a push into the Old City earlier this week, but have made slow progress as the last Isis fighters there are holed up with an estimated 100,000 civilians according to the United Nations.

Earlier this month Mosul residents reported Isis fighters began sealing off the area around the mosque. Residents said the militants ordered families living in the area to evacuate in preparation for a final stand.

The fight to retake Mosul was launched more than eight months ago and has displaced more than 850,000 people.

The famous mosque is seen behind this crowd in Mosul (AP)

While Iraqi forces have experienced periods of swift gains, combat inside the city has been gruelling and deadly for both Iraqi forces and civilians.

The United Nations has warned Isis fighters are targeting children to prevent civilians from fleeing the city.

The UN children's agency said it has documented a number of cases in which Isis fighters killed the children of families trying to escape from neighbourhoods controlled by the militants.

"They are using children as a weapon of war to prevent people from fleeing," said Unicef's Iraq representative, Peter Hawkins. "This just highlights how indiscriminate and catastrophic this war is."