As Iraqi special forces push deeper into the Islamic State stronghold of Mosul, they have found the first evidence Australians have been working with the extremists in the city.

Iraqi Special Operations Forces, the so-called Golden Brigade, discovered a fresh Islamic State (IS) flag said to belong to an Australian IS member at Qadisiyah, in the north-east of the city.

Sergeant Wael Rasheed said it belonged to an Australian IS fighter. Locals said he had been working as a medic.

An Australian doctor, Tareq Kamleh, became infamous when he appeared in an IS propaganda video urging others to join the extremists in their so-called caliphate.

However, he was said to be in Raqqa, across the border in neighbouring Syria.

A year ago he told a News Corp newspaper there was another Australian also working with IS, as an intensive-care doctor.

As the forces push deeper into the heart of the city they hope to capture, and find more solid information about, the foreign fighters who have helped turn it into a lethal bastion for the extremists.

The Australian’s IS flag was discovered in Mosul one block away from a house the extremists had turned into a workshop to make “killer drones” — adaptations of small, commercially available drone aircraft fitted with explosives to drop on enemy forces.

BBC correspondent Quentin Sommerville and cameraman Nik Millard were filming with the Golden Brigade when they made the find.

Mr Sommerville said the unit moved into the area after five days of fighting, looking for intelligence on IS operations.

Iraqi forces are pushing deeper into the heart of the city. Photo: AAP.

The Australian had already fled and there was no photo of him.

“However, I know [what] he looks like,” Sergeant Rasheed said.

Australian intelligence agencies believe 110 Australians have joined IS in Iraq and Syria and more than 50 have been killed.

Iraqi soldiers gathering intelligence on how IS works

At the start of last year the ABC revealed Australian jihadists Khaled Sharrouf and Mohammed Elomar were living in Raqqa and had enslaved a group of young Yazidi women kidnapped by IS in Iraq.

So-called Popular Mobilisation Forces, dominated by Shiite militias loyal to Iran, are attempting to seal the region between Mosul and the Syrian border but a network of desert roads connects the two territories.

As well as links with Iraqi intelligence agencies, Australia has agreed to share intelligence with Iran in the hope of gathering more information about Australians who join the extremists.

The Iraqi soldiers are gathering intelligence on how IS works. Documents found in the first month of the operation have provided detail of radio codes, disciplinary procedures and force numbers in specific locations.

Rebel forces in Syria have previously discovered large amounts of documents and digital information which provided details of the names, ages, and origin of foreign fighters.

When American forces battled the progenitor of IS, Al Qaeda in Iraq, they discovered large caches of documents which revealed organisational structure and financing.

– ABC