The UN children's agency said it has documented a number of cases in which ISIL fighters killed the children of families trying to escape from neighbourhoods it controlled.
"They are using children as a weapon of war to prevent people from fleeing," said UNICEF's Iraq representative Peter Hawkins. "This just highlights how indiscriminate and catastrophic this war is."
Iraqi troops are slowly clearing the last pockets of ISIL fighters from Mosul's Old City in an operation launched earlier this week. But an estimated 100,000 civilians - of whom half are children - packed into the dense terrain have slowed progress.
More than five million children are in urgent need of aid in Iraq, UNICEF said.
"Across Iraq, children continue to witness sheer horror and unimaginable violence," it said in a statement. "They have been killed, injured, abducted, and forced to shoot and kill in one of the most brutal wars in recent history."
UNICEF said 1,075 Iraqi children have been killed and 1,130 wounded since ISIL overran nearly one-third of Iraq in 2014. In the past six months alone, violence in Iraq has killed 152 children and injured 255, it said.
In addition, the agency said, more than one million children have had their education put on hold by either ISIL rule or displacement.
Children have also been forced to take part in violence. UNICEF said at least 231 children under the age of 18 were recruited by ISIL and other armed groups.
"The country's future security and economic strength is determined by what is happening to its children today," Hawkins said.
The Iraqi government says more than 850,000 people have been forced from their homes by the operation, which was launched in October. On the city's west, entire blocks have been flattened by clashes, air strikes, and artillery fire.
Source: News agencies