About 1200 US troops moved in to Mosul on Tuesday after large groups of anti-US fighters took over police stations in the city in the past few days.
The US forces set up road blocks and posted guards on major public buildings.
"The operation has been launched," said Stuart Williams, a US military officer. "Two battalions are sweeping from the west side to the east."
The US-led military in Mosul has conducted daily operations to control fighters in the city, but this was the largest mission in recent times, said a journalist embedded with the military.
Destroying police stations
"We are going through each police station in the city and making sure they are secure for the Iraqi police," said military spokeswoman Captain Angela Bowman, adding that helicopters and other aircraft were flying in the area.
Williams said the US troops, backed by an Iraqi security force battalion, were hoping to retake a dozen police stations abandoned or seized by fighters in a string of attacks last week.
US soldiers from Stryker Brigade
have closed Mosul's bridges
But witnesses in the city have reported that rather than seize and hold police stations, the fighters are now using explosives to destroy them, leaving no sites for the Iraq National Guard to return to.
Iraq's interior ministry said seven police and 30 fighters were killed in clashes in Mosul on Sunday.
Contrary to interim Iraqi Prime Minister Iyad Allawi's statements that Mosul was under his government's control, several dozen fighters have dispersed in the city and taken up defensive positions. Nearly all of the city's residents are staying indoors for fear of getting caught in the crossfire.
Civilians trying to reach their homes were caught in several traffic congestions throughout the city after Mosul Governor Duraid Qashmula ordered all bridges closed for a period of 24 hours.
Mosul, 370km north of Baghdad, has been rocked by clashes since a US-Iraqi assault was launched on Falluja on 8 November.
Mosul journalist Abd Allah Ghafar contributed to this report.