IS militants

The claims have not been independently verified, but ministry spokesman Dawlat Waziri said no civilians were harmed in the massive blast that targeted a network of caves and tunnels.

"No civilian has been hurt and only the base which Daesh used to launch attacks in other parts of the province was destroyed," Mr Waziri said in a statement, using the Arabic term for Islamic State, which has established a small stronghold in eastern Afghanistan.

It's the first the US has dropped a GBU-43 bomb - the largest non-nuclear device it has ever used in combat.

US Central Command, which oversees US military Middle East operations, said the request for the strike came from the Iraqi security forces and struck ISIS fighters and equipment.

Australia is one of the coalition partners conducting air strikes against suspected ISIS targets in Mosul, and the ABC has asked the Australian Defence Force to confirm Australian aircraft were not involved in the incident.

Civil Defence chief Brigadier Mohammed Al-Jawari said rescue teams had recovered 40 bodies and that many others lay buried in the rubble.

Twelve IS jihadists were also killed in the dawn attack.

Hours later, witnesses said gunfire was still being heard and militants were walking openly through the streets.

Separately, Iraqi pro-government forces are continuing an offensive to re-take the IS-held city of Mosul to the south.

A news agency affiliated to IS claimed its fighters had broken into Kirkuk's town hall and seized a central hotel, but officials denied this.