- Video report by ITV News International Affairs Editor Rageh Omaar
The United States military has urged Iraqi and Kurdish authorities to negotiate over their differences, after Iraq's military retook the city of Kirkuk from Kurdish forces.
Two weeks after fighting together against the Islamic State group, Iraqi forces pushed their Kurdish allies out of the disputed city on Monday, seizing oil fields and other facilities amid soaring tensions over a controversial referendum on Kurdish independence.
Thousands of civilians have started returning to Kirkuk, after fleeing before the confrontation over the city.
A Pentagon spokesman, Colonel Rob Manning, said the confrontation was a "distractor" to the US goal of destroying the Islamic State group, and that Iraqi security forces and Kurdish peshmerga troops should not be "going at each other".
There has been friction following a controversial Kurdish referendum for independence from Iraq, which Baghdad has condemned and refused to acknowledge.
Kurdish peshmerga forces offered little resistance as troops rolled into the city, swiftly retaking the territory which the Kurds had held for three years.
Iraqi commanders launched the operation at dawn, first grabbing several major oil fields north of the city, as well as its airport and an important military base before rolling into the centre of Kirkuk itself.
Inside the city, residents hid in homes and described hearing what sounded like shelling and rocket fire.
Kurdish officials described the move as a "major, multi-pronged" and "unprovoked attack" on the multi-ethnic city.
The The Kurdistan Region Security Council said permerga forces had responded by destroying at least five US-supplied Humvees used by the military.
Civilians and federal troops pulled down Kurdish flags around the city, and the Kurdish Governor Najmaddin Karim, who had stayed at his post despite being dismissed by Baghdad weeks ago, fled to Irbil, the capital of Iraq's autonomous Kurdish zone.
Revellers waving Iraq's national flag and the flag of its Turkmen minority flooded central Kirkuk in an evening celebration.
But the Shiite sectarian chants heard above the din of the rally underscored the coming political battles between Iraq and its Kurdish region.
Iraqi forces were supported - as they always are now in major operations - by the Popular Mobilisation Forces, a predominantly Shiite militia coalition that the Kurds see as an instrument of Iranian policy.
In their bid to keep Kirkuk and its oil-rich countryside, Kurdish leaders whipped up fears that the Baghdad government is dominated by Tehran and would oppress Kurds if they recaptured the city.
Kirkuk, which is home to some one million Arabs, Kurds, Turkmen and Christians, has been at the heart of a long-running dispute between the autonomous Kurdish region and the central government in Baghdad.
The city lies to the north of the Kurdish semi-autonomous region of Iraq, but had fallen under peshmerga control as in the summer of 2014.
Government forces in the region were unable to halt the advance of IS in the region - so the peshmerga stepped in to repel the terrorists and take over the city.
Today, Iraqi Prime Minister Haider al-Abadi's office said he had ordered federal forces to "impose security in the city in cooperation with the inhabitants and the peshmerga".
Iraq's government barred international flights to and from the region and asked neighboring Turkey and Iran to close their borders. Iran closed its three official crossings with the Kurdish region Sunday, Kurdish media reported. It also froze currency transfers to four banks operating in the Kurdish region.