The Kurdistan Region Security Council said that Iraqi forces and members of the Popular Mobilisation Force (PMF) - paramilitary units largely made up of Iran-trained Shia militias - were advancing from Taza, south of Kirkuk, in a "major operation".
The Baghdad central government has taken a series of steps to isolate the autonomous Kurdish region since its overwhelming vote for independence in a September 25 referendum, including banning worldwide flights from going there.
At the same time, Iraqi commanders claimed Friday that Kurdish forces were actually withdrawing from positions that they had previously held southwest of Kirkuk - the city itself falls outside the autonomous zone of the KRG - and asserted that the Iraqi Army was moving quickly to secure the areas. "Iraqi armed forces are advancing to retake their military positions that were taken over during the events of June 2014", an Iraqi general told AFP news agency by telephone, asking not to be identified.
The Iraqi government accused Kurdish authorities on Sunday of bringing fighters from Turkey's separatist Kurdistan Workers Party (PKK) to the disputed oil-rich city of Kirkuk and said it considered the move a "declaration of war".
An Iraqi military official denied that troop movements around Kirkuk were part of an all-out assault on the Peshmerga.
On Thursday, the prime minister and the Iraqi military reiterated that they had no plans for a military operation in Kirkuk and were focused on recapturing the last IS foothold in Iraq near the border with Syria.
The Kurdish leadership rejected yesterday the Iraqi government demand that it cancel the outcome of a Sept 25 independence referendum as a pre-condition for talks to resolve the dispute.
The KRG and the Shi'ite-led central government in Baghdad have been at loggerheads since the September 25 vote and its loud call for Kurdish independence.
"We are getting ready for the battle in al-Qaim, we're not concerned by confrontations other than with Daesh", he said, using an Arabic acronym for Islamic State. The city and the surrounding area, including the oil fields, are under Kurdish control.