The humanitarian impact of a planned offensive by Iraqi pro-government forces to retake the city of Mosul is expected to be "enormous", the UN says.
Up to 1.2 million people living in and around Mosul could be affected by the operation to drive out jihadist militants from Islamic State, it warns.
More than 120,000 people have already been displaced by fighting since March as troops clear territory to the south.
Mosul, Iraq's second largest city, has been under IS rule since June 2014.
Earlier on Tuesday, elite troops launched an operation to recapture the key town of Qayyarah, 60km (40 miles) to the south.
A spokesman for the Counter-Terrorism Service (CTS), Sabah Numan, said its forces were battling IS militants on the town's outskirts and were working in co-ordination with armed residents inside.
Pro-government forces have been preparing to move on Qayyarah for weeks, after recapturing a nearby airbase that will be used as a logistics hub for the wider offensive on Mosul.
The town's mayor, Saleh al-Jubouri, said an estimated 15,000 civilians were trapped there, but that most of the militants had fled or been killed.
'Worse to come'
Once the battle for Mosul begins, a further 400,000 people are expected to escape to the south of the city, 250,000 to the east and another 100,000 to the north-west.
"The humanitarian impact of a military offensive there is expected to be enormous," UN High Commissioner for Refugees (UNHCR) spokesman Adrian Edwards told reporters in Geneva.
Contingency plans have been drawn up to provide shelter for up to 120,000 people fleeing Mosul, while the agency looks to set up six new camps across northern Iraq.
"Progress depends on both the availability of land and of funding," Mr Edwards said.
The UNHCR's appeal for $584m for displaced Iraqis is only 38% funded, and many private landowners are unwilling to lease land to the agency.
More than 3.38 million people have been forced to flee their homes in Iraq since 2014, when IS militants overran large parts of the country's north and west and proclaimed the creation of a caliphate stretching into neighbouring Syria.
An additional one million Iraqis were displaced as a result of the sectarian conflict that followed the US-led invasion in 2003.
"Worse is yet to come," said the UNHCR's representative in Iraq, Bruno Geddo. "We predict that it could result in massive displacement on a scale not seen globally in many years."