* U.S. defence secretary says confident Iraq will prevail
* U.N. fears humanitarian crisis
* Kurds says operation under way in villages east of Mosul (Adds Iraqi military statement saying Islamic State defence lines destroyed)
By Babak Dehghanpisheh and Maher Chmaytelli
BAGHDAD, Oct 17 (Reuters) - Iraqi government forces, with air and ground support from the U.S.-led coalition, launched an offensive on Monday to drive Islamic State from the northern city of Mosul, the militants' last major stronghold in the country.
Helicopters released flares overhead and explosions could be heard on the city's eastern front, where Kurdish fighters moved forward to take outlying villages, a Reuters correspondent said.
The United States predicted Islamic State would suffer "a lasting defeat" as Iraqi forces mounted their biggest operation since the U.S. withdrew its own troops in 2011.
Some 30,000 Iraqi soliders, Kurdish Peshmerga militia and Sunni tribal fighters were expected to take part in the offensive to drive an estimated 4,000 to 8,000 Islamic State militants from Mosul, a city of 1.5 million people.
"I announce today the start of the heroic operations to free you from the terror and the oppression of Daesh," Prime Minister Haider Abadi said in a speech on state TV, using an Arabic acronym for Islamic State.
"We will meet soon on the ground of Mosul to celebrate liberation and your salvation," he said, surrounded by the armed forces' top commanders.
Qatar-based al-Jazeera television aired video of what it said was a bombardment of Mosul that started after Abadi's speech, showing rockets and bursts of tracer bullets across the night sky and loud sounds of gunfire.
"This operation to regain control of Iraq's second-largest city will likely continue for weeks, possibly longer," said the commander of the coalition, U.S. Lieutenant General Stephen Townsend, in a statement.
The Mosul offensive is one of the biggest military operations in Iraq since the 2003 U.S.-led invasion that toppled Saddam Hussein.
"This is a decisive moment in the campaign to deliver ISIL a lasting defeat," U.S. Defense Secretary Ash Carter said in a statement, using an acronym for Islamic State.
"We are confident our Iraqi partners will prevail against our common enemy and free Mosul and the rest of Iraq from ISIL's hatred and brutality."
In 2014, Islamic State leader Abu Bakr al-Baghdadi proclaimed from Mosul's Grand Mosque a "caliphate" in Iraq and neighbouring Syria.
If Mosul falls, Raqqa in Syria will be Islamic State's last city stronghold.
KURDISH FIGHTERS
Islamic State has been retreating since the end of last year in Iraq, where it is battling U.S-backed government and Kurdish forces as well as Iranian-backed Iraqi Shi'ite militias.
The Iraqi Kurdish military command said 4,000 Peshmerga were taking part in an operation to clear several villages held by Islamic State to the east of Mosul, in an attack coordinated with a push by Iraqi army units from the southern front.
In its first statement on the Mosul operations, the Iraqi army media office said the advancing troops destroyed a number of Islamic State defence lines.
Strikes carried out by the Iraqi and coalition jets hit an unspecified number of the militants positions, it said.
A column of black smoke was rising from one of the insurgents' positions on the eastern front, the Reuters correspondent said, and seemed to be from burning oil being used to block the path of the Kurds and obstruct the jets' view.
"We are the real Muslims, Daesh are not Muslims, no religion does what they did," said a young Kurdish fighter in battle dress as he scanned the plain east of Mosul from his position on the heights of Mount Zertik.
As he spoke a Humvee drove by with the word Rojava, or Syria's Kurdistan, painted on the protection plate of the machine gun turret.
"This is all Kurdistan," Major Shiban Saleh, one of the fighters onboard, said. "When we're done here, we will chase them to Raqqa or wherever they go," he said.
He said about 450 Syrian Peshmerga fighters were involved in the offensive east of Mosul, which aims to take back nine villages during the day.
HUMANITARIAN CRISIS FEARED
Early on Monday, Abadi sought to allay fears that the operation would provoke sectarian bloodletting, saying that only the Iraqi army and police would be allowed to enter the mainly Sunni city. He asked Mosul's residents to cooperate with them.
Local Sunni politicians and regional Sunni-majority states including Turkey and Saudi Arabia warned that letting Shi'ite militias take part in assault could spark sectarian violence.
The Iraqi army had dropped tens of thousands of leaflets over Mosul before dawn on Sunday, warning residents that the offensive was imminent.
The leaflets carried several messages, one of them assuring the population that advancing army units and air strikes "will not target civilians" and another telling them to avoid known locations of Islamic State militants.
Reflecting authorities' concerns over a mass exodus that would complicate the offensive and worsen the humanitarian situation, the leaflets told residents "to stay at home and not to believe rumours spread by Daesh" that could cause panic.
Russian President Vladimir Putin said on Sunday he hoped the United States and its allies would do their best to avoid civilian casualties in an attack on Mosul.
The United Nations last week said it was bracing for the world's biggest and most complex humanitarian effort in the battle for the city, which could make up to 1 million people homeless and see civilians used as human shields or even gassed.
There are already more than 3 million people displaced in Iraq as a result of conflicts involving Islamic State. Medicine is in short supply in Mosul, and food prices have risen sharply.
(With additional reporting by Ahmed Rasheed in Baghdad and Michael Georgy in Erbil; Editing by Louise Ireland)
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