Qaraqosh, also known as Hamdaniya, was liberated on Sunday, a commander told news outlet CNN.
The move comes as Iraqi and Turkish troops get closer to Mosul, IS's stronghold in the country.
State-run al-Iraqiya TV has reported that Lt Gen Riyad Jalal, commander of the Iraqi ground forces, said they were bringing local officials back to the area to reopen public buildings and start planning how to rebuild and repair the town's infrastructure.
Earlier in the week Bartella, another Christian town, was freed from the terror group.
On Saturday church bells rang out in Bartella, the first time they have been heard in two years.
Mosul has been under IS control since June 2014 and tens of thousands of Christians have been forced to leave.
In the 1990s it was estimated the number of Christians in Iraq was two million, but figures now suggest that's well below 200,000.
