The United States is prepared to take "targeted and precise" military action in Iraq, Barack Obama has announced.
Up to 300 military advisers to help train and advise Iraqi forces will be deployed but American troops "will not be returning to combat in Iraq", the president said in an address from the White House.
Intelligence services will be "significantly" increased to build up a better picture of what is happening on the ground and joint operation centres with Iraqi forces will be set up, he added.
President Obama said: "We will be prepared to take targeted and precise military action if and when we determine that the situation on the ground requires.
"If we do I will consult closely with Congress and leaders in Iraq and the region."
US secretary of state John Kerry is being sent to the Middle East and Europe to push a "diplomatic effort" to deal with the crisis.
"Just as all Iraq's neighbours must respect Iraq's territorial integrity, all of Iraq's neighbours have a vital interest in ensuring that Iraq does not descend into civil war or become a safe haven for terrorists," Mr Obama added.
"A bove all, Iraqi leaders must rise above their differences and come together around a political plan for Iraq's future."
Islamic State of Iraq and the Levant (Isis) insurgents overran Iraq's second city, Mosul, last week, and also launched an assault on the country's biggest oil refinery in Baiji, north of Baghdad.
Prime Minister David Cameron has insisted "everything that can be done is being done is being done" to stop Britons being radicalised in Iraq and Syria amid fears that 450 people have joined the ranks the extremist Islamist militant group.
Speaking in Downing Street after talks with Nato secretary-general Anders Fogh Rasmussen, the Prime Minister said: "The work of the security intelligence and policing services is very much now being focused on to this area and has been for sometime and I've chaired meetings in Whitehall to make sure every department is involved in that and everything that can be done is being done."
He added: "We will continue to take all and every step we can to stop people travelling to Syria to prevent them coming back if they have been radicalised and to keep the country safe."
Mr Rasmussen called for the Iraqi Shia-led government to bring in Sunnis and Kurds in an attempt to quell the insurgency.
He said: "On the Iraqi leadership I'm very much in line with the Prime Minister in that what really counts is the political approach and what we need in Iraq is a much more inclusive government that also includes Sunni and Kurd communities."