Iraqi forces have entered the disputed city of Kirkuk and taken control of the provincial council's headquarters, witnesses say.
Residents told Reuters that Iraqi forces removed the Kurdish flag that was hoisted on the governorate building in April next to an Iraqi flag.
They said that only the Iraqi flag was flying.
Clashes were reported earlier in the day south of Kirkuk as thousands of residents were reportedly fleeing the Kurdish-controlled city.
Earlier, the Iraqi Army said government troops had moved toward Kurdish-held sites in the northern province of Kirkuk, capturing several installations from Kurdish fighters.
The military said on October 16 that pro-government forces took control of roads and infrastructure, including a military base, an airport, and an oil field near the city of Kirkuk.
A spokesman for Kurdish forces, Brigadier General Bahzad Ahmad, confirmed that federal forces seized industrial areas south of Kirkuk in fighting that caused "lots of casualties."
Kurdish Peshmerga forces took control of much of Kirkuk Province in 2014, when militants from the extremist group Islamic State (IS) swept across northern Iraq.
Prime Minister Haidar al-Abadi said the operation was necessary to "protect the unity of the country" three weeks after Kurdish officials held an independence referendum in their autonomous region and surrounding areas, including the city of Kirkuk.
Kurdish officials said residents voted overwhelmingly for independence in the referendum, which Baghdad denounced as illegal.
Crisis talks on October 15 failed to resolve the standoff as Kurdish leaders refused demands by the Baghdad government to reject the referendum result.
The United States late on October 15 called on "all actors" in the region to avoid "destabilizing actions that distract from the fight against [IS] and further undermine Iraq's stability."
Pentagon spokeswoman Laura Seal said that Washington urged dialogue "as the best option to defuse tensions."
The U.S. State Department said it was "very concerned" about the reports of a "confrontation" and that it was engaged with all parties.
Oil-rich Kirkuk Province is claimed by both the Kurds and Baghdad.