Meanwhile, Syrian forces made progress against the militant group in the region surrounding the province of Raqqa in the first push into the area since 2014.
Iraqi security forces, with the support of other militia, stormed the first neighborhood in southern Falluja on Saturday after recapturing the district of al Nuaimiya -- 5 kilometers (3.1 miles) from central Falluja.
Separately, Iraqi security forces recaptured the key small town of Saqlawiya, 10 kilometers (6.2 miles) northwest of Falluja, on Saturday. Troops there "raised the national flag over the town's main buildings," Iraq's Joint Operation Command said.
The Iraqi military swept through the streets conducting searches for "hundreds of IEDs" that ISIS planted throughout Saqlawiya, military officials said.
Coalition warplanes carried out an airstrike on ISIS militants as they were trying to escape on a raft on the Euphrates River, south of the city, killing everyone aboard raft, the officials said.
The takeover of Saqlawiya comes a day after coalition warplanes bombed ISIS command centers and tunnel networks
in Falluja, killing dozens of militants.
The airstrikes targeted ISIS tactical units, intelligence sources said.
Iraqi security forces said Saturday's advances mean ISIS is losing its last strategic foothold between Falluja and the rest of Anbar province to the west, as well as other areas to the north.
In January 2014, Falluja became the first Iraqi city to fall to ISIS -- dealing a blow to Iraq as well as Western countries battling the terrorist group. Saturday is the first time more than two years Iraqi security forces have come this close to a full takeover, army officials said.
In neighboring Syria, the fight to retake the strategic city of Raqqa province from ISIS militants raged on.
The Syrian Army, joined by Russian forces, advanced into the province on Saturday "in a major offensive backed by Russian warplanes," according to the London-based Syrian Observatory for Human Rights (SOHR).
Aid groups say the military advance to enter Raqqa, located on the north bank of the Euphrates River, comes after three days of intense fighting.
"At least 26 ISIS militants and 9 Syrian military soldiers were killed," said SOHR.
This is the first time in two years the Syrian Army has been inside Raqqa province.
A humanitarian crisis
The civil war in Syria has claimed the lives of more than 250,000 people nationwide and displaced more than 10 million
, according to the United Nations.
As the battle for Falluja intensifies, an estimated 50,000 people, including 20,000 children
, are trapped between opposing fighters, according to the United Nations.
Men and boys who refuse to fight for ISIS are being killed, and civilians have died in heavy shelling, the United Nations says.
Aid groups say ISIS is using thousands of civilians there as human shields.
The hundreds who have escaped say
Falluja lacks food, clean water and medical supplies.