Iraqi government forces have paused in their push to recapture western Mosul from Islamic State because of the high rate of civilian casualties, a security forces spokesman said.

The halt was called on Saturday as the United Nations expressed its profound concern over reports of an incident during the battle on March 17 that killed or wounded dozens of people in the Islamic State-held al-Jadidah district, apparently involving air strikes by Iraqi or US-led coalition forces.

"We are stunned by this terrible loss of life," Lise Grande, the humanitarian coordinator for Iraq, said in a statement.

The US military said on Saturday that a review determined that at the request of Iraqi security forces, US-led coalition struck Islamic State fighters and equipment "at the location corresponding to allegations of civilian casualties."

US Central Command, which oversees operations in the Middle East, said in a statement that it took the allegation seriously and that it is conducting a formal investigation "to determine the facts surrounding this strike and the validity of the allegation of civilian casualties."

Civil defence officials and residents have said many people lay buried in collapsed buildings after air strikes against Islamic State insurgents triggered a big explosion.

The exact cause of the collapses was not clear but a local lawmaker and two residents said the air strikes may have detonated an IS truck filled with explosives, destroying buildings in the heavily-populated area.

Reports on the numbers of civilian casualties have varied but Civil Defence chief Brigadier Mohammed Al-Jawari told reporters on Thursday that rescue teams had recovered 40 bodies from collapsed buildings.

Residents escaping besieged western Mosul have told of Iraqi and U.S.-led coalition air strikes demolishing buildings and killing civilians in several cases.

The Iraqi Observatory for Human Rights said that since the campaign on western Mosul began last month, unconfirmed reports said nearly 700 civilians had been killed by government and coalition air strikes or Islamic State actions.