Qayyarah lies on the western bank of the Tigris river, about 60 kilometres (35 miles) south of Mosul, the Islamic State group's last major urban stronghold in Iraq.
"The operation started at dawn with the participation of Counter-Terrorism Service (CTS) and army forces," Brigadier General Firas Bashar told AFP.
US-led coalition aircraft provided support, said Bashar, the spokesman for the operations command in Nineveh, the province in which Qayyarah and Mosul are located.
"The operation is ongoing and currently achieving its goals," CTS spokesman Sabah al-Noman said.
"Qayyarah will be cleared and the operation wrapped up quickly, bolstering our plans... for the final battle to liberate Mosul," he told AFP.
He said Iraqi forces had been working with armed residents inside the town for this offensive, a rare occurrence.
"There has been coordination with groups of armed residents inside," Noman said, declining to provide further details.
Iraqi forces have spent weeks positioning themselves around the town, which is expected to be used as a launchpad for a broader operation against Mosul in the coming weeks or months.
"There are plans to bring food and medical supplies to those who are still in their homes and did not manage to escape Qayyarah ," he told AFP.
"We will distribute this aid immediately after the liberation of the town," he said.
Juburi said CTS forces were making quick progress in Qayyarah and had already retaken key landmarks in the town hours after the launch of the operation.
"Most of the Daesh (IS) fighters have been killed or have fled," he said.
After retaking Fallujah, west of Baghdad, in June, the main focus of Iraqi security forces is Mosul, which is the country's second city and IS's de facto capital in Iraq.
Iraqi forces backed by the coalition had weeks ago recaptured a nearby air field, which has since been undergoing repairs to be used by Iraqi forces in the battle for Mosul.