Hundreds of Peshmerga fighters, backed by artillery and US-led coalition air strikes, advanced on Bashiqa from three directions on Monday morning.
By late afternoon, they were moving from house to house clearing the town, a Peshmerga statement said.
Meanwhile, the Iraqi military said it had found a mass grave filled with some 100 decapitated bodies south of Mosul.
The grave was located in the grounds of an agricultural college on the outskirts of the town of Hamam al-Alil, which troops entered over the weekend.
