The senior security source, asking not to be named, said Kurdish peshmerga fighters were being given “a few hours” to pull out of the area around the Fishkhabur border post.
Clashes between the two sides had ceased “with only occasional exchanges of fire,” said the source.
Iraqi forces on Thursday mounted a new assault on Kurdish fighters in the disputed oil-rich Zummar area of Nineveh province, triggering heavy artillery exchanges.
In an advance over dusty terrain with armored vehicles, government forces recaptured villages close to the route of a strategic oil export pipeline linking the Kirkuk fields retaken from the Kurds earlier this month with the Turkish port of Ceyhan.
The Kurds shut down the pipeline during the 2014 sweep through northern and western Iraq by the Islamic State (IS) jihadist group and built their own pipeline further north.
The Fishkhabur region, at the extreme edge of autonomous Iraqi Kurdistan and where the Turkish, Iraqi and Syrian borders converge, is of strategic importance to both Baghdad and the Kurds of northern Iraq.
The Kurds have been defending the Zummar and Rabiya areas of Fishkhabur because they are used by Kurdish forces battling IS in Syria to smuggle out fuel products by tanker trucks to Turkey, according to the Iraqi source.
The UN Security Council on Thursday urged Iraq’s government and Kurdish leaders to set a timetable for talks on ending their conflict triggered by a September 25 independence referendum held by the Kurds in defiance of Baghdad.