US President Barack Obama announced he is sending up to 300 military advisers to Iraq to help local forces fight a militant insurgency but stressed the need for a political solution to the country's crisis.
At a news conference in Washington, Mr Obama said the US is ready for targeted military action against Islamists in Iraq, but stressed American troops would not be returning to combat there.
"American combat troops are not going to be fighting in Iraq again. We do not have the ability to simply solve this problem by sending in tens of thousands of troops." Mr Obama withdrew US troops from Iraq at the end of 2011.
The US said the US was ready for "targeted and precise military action" against Islamists in Iraq "if and when the situation on the ground requires it" - delaying but still keeping open the prospect of US air strikes against a militant insurgency.
Mr Obama urged the Shi'ite government of Prime Minister Nouri al-Maliki to take urgent steps to heal the sectarian rift, something US officials say the Iraqi leader has failed to do so far and which an al Qaeda splinter group leading the Sunni insurgency has exploited.
Senior US lawmakers have called for Mr Maliki to step down, and Obama administration officials have also made clear their frustration with him, Reuters reports.
While the president did not join calls for Mr Maliki to go, saying "it's not our job to choose Iraq's leaders," he avoided any expression of confidence in the embattled Iraqi prime minister when asked by a reporter whether he would do so.
Drawn from America's special forces, the military advisers will set up joint command centres with the Iraqi military in Baghdad in the north of the country. They will also go out in the field.
Senior administration officials indicated that militants from the Islamic State of Iraq and Syria (ISIS) could come under American fire over the boarder in Syria.
It is expected that the US Secretary of State John Kerry will travel to Iraq as part of a wider diplomatic mission to the Middle East and North Africa. His main will be to press for the formation of a new, more inclusive government, the BBC reports.
In the meantime, the United States began flying F-18 attack aircraft from the carrier George H.W. Bush on missions over Iraq to conduct surveillance of the insurgents. The carrier was ordered into the Gulf several days ago.
The sprawling Baiji refinery, 200km north of the capital near Tikrit, was a battlefield as troops loyal to the Shi'ite-led government held off insurgents from the ISIS and its allies who had stormed the perimeter a day earlier, threatening national energy supplies.
A government spokesman said its forces were in "complete control" but a witness in Baiji said fighting was continuing. Two Iraqi helicopters tried to land in the refinery but were unable to because of insurgent gunfire, and most of the refinery remained under rebel control.