The United States has vowed to help Iraqi forces re-take the city of Ramadi which has been captured by Islamic State fighters.
A column of 3000 Shia fighters has arrived at a military base near Ramadi preparing for a counter-offensive.
The American Secretary of State, John Kerry says he's confident IS will ultimately be defeated.
Iraqi state TV described tanks and other military vehicles entering al-Habbaniyah military camp. IS fighters are reportedly moving towards the base.
The Iraqi government called for help from the Iran-backed militias after the military was routed and fled.
About 500 people died in the city - only 112km west of Baghdad.
Shia forces at Habbaniya, about 20km from Ramadi, were "now on standby," the head of the Anbar provincial council, Sabah Karhout said.
In a statement, the council said about 3,000 Shia fighters had arrived in Anbar to take part in "the liberation of all Ramadi areas in which IS militants took positions".
But IS militants had also advanced from Ramadi to the outskirts of the town of al-Khalidiyah, near the Habbaniyah base, an IS statement and witnesses said.
The US admitted on Monday the loss of Ramadi was a setback.
However, the White House vowed US forces would help the Iraqi government take it back.
Pentagon spokesman Col Steven Warren said: "This is a difficult, complex, bloody fight. And there's going to be victories and setbacks. We will retake Ramadi."
The Shia militias, known as the Popular Mobilisation (Hashid Shaabi), were key to the recapture from IS of another city, Tikrit, north of Baghdad, in April.
But their use has raised concern in the US and elsewhere that it could provoke sectarian tension in Sunni areas such as Ramadi.
The militias pulled out of Tikrit following reports of widespread violence and looting.
In another move, the Iranian Defence Minister, Hossein Dehghan, has arrived in Baghdad on a visit arranged before the latest developments in Ramadi.
The police and military made a chaotic retreat from Ramadi, which has been contested for months, after days of intense fighting.
A statement purportedly from IS said its fighters had "purged the entire city". It said IS had taken the 8th Brigade army base, along with tanks and missile launchers left behind by troops.
An Iraqi army officer said most troops had retreated to a military base in the city of Khalidiya, east of Ramadi, despite an order from Prime Minister Abadi for them to stand firm.
The US-led coalition says it has carried out 19 air strikes in Iraq since early on Sunday, including attacks around Ramadi.
However, they appear to have failed to hinder the IS advance there.
Reports said Iraqi forces had fled following a series of suicide car bomb attacks on Sunday.
IS reportedly controls more than half of Anbar's territory.
Up to 25,000 people have fled Ramadi after it was captured by IS fighters.
The UN and other aid agencies have started distributing food, water and medical supplies as well as setting up temporary camps to cater to the refugees.
The United Nations says most are headed towards Baghdad.