The United States and key allies will host a donors conference next month to raise funds for Iraqi civilians driven from their homes by fighting.
The announcement came Wednesday even as Iraqi forces battled Islamic State fighters to secure control of Fallujah and thousands fled the city.
The US State Department, which had already pledged $20 million in extra funding for the UNHCR this week, said the conference will be held in Washington on July 20.
Canada, Germany and Japan will co-host the meeting, it said, and the funds raised will support the United Nations efforts to house, freed and treat the displaced.
"Due to the conflict and upheaval since January 2014, more than 3.4 million people are now displaced throughout Iraq and more than half are children," the State Department said.
"Across the country, over 10 million people are in urgent need of lifesaving humanitarian assistance."
According to the US statement, the UN humanitarian response plan will cost $861 million and is only one third funded.
"Over the coming months, humanitarian costs could climb to over $2 billion as potentially a million people are displaced from Mosul as military operations liberate Iraq's second largest city," it added.
Iraqi officials said Wednesday that they have cleared IS jihadist fighters from the northern and central areas of Fallujah, but that holdouts remain.
Meanwhile, the United Nations estimates that at least 85,000 civilians have fled the area, adding to an already grave humanitarian crisis.