Christina Abada, was rescued by the Iraqi Special, according to World Watch Monitor.
The young girl's parents have been living at the Ashti refugee camp, near Erbil - the capital city of Iraqi Kurdistan - for the last two years.
Her mother, Aida Nuh, told Reuters: "The best day of my life is the day when Christina came back."
Her daughter was abducted by militants in August 2014, a few weeks after overrunning the town of Qaraqosh - 10 miles southeast of Mosul.
Christians who did not or could not escape in time were faced to pay a tax for protection, convert to Islam, or killed.
The family's efforts to track the kidnapped child though Arab friends were rewarded on Friday, when they got a call telling them Christina had been found in Hayy al-Tanak, in Mosul.
Islamic State has kidnapped thousands of men, women and children from Iraq's minorities and Christians have also been targeted for their faith.
Reports of violence, repression and murder by the terrorist organisation and other extremist groups have become increasingly prevalent in the country.
Christina, whose two sisters and two brothers escaped to Kurdish territory before the arrival of the militants is getting used to saying "mum" and "dad" again.
Her mother who is from the Christian city of Qaraqosh in the Nineveh Plains, added: "She stayed three years with the terrorists. Of course she forgot who her mother is, who her father is, that we are her family, but she will learn again."