Mr Cameron has ruled out any military intervention in support of the government of Iraqi Prime Minister Nouri al-Maliki.
He has promised to do everything to protect Britain from the terrorist threat from fighters returning from Iraq and Syria.
The fighting between ISIS and Iraqi security forces, which are supported by Shia militias, has focused around the city of Baquba, 60km (35 miles) from Iraqi capital Baghdad.
Prime minister will meet top security advisers later today to discuss crisis in Iraq.
The National Security Council, chaired by the prime minister, will discuss the gains made by Islamic State in Iraq and the Levant (ISIS) fighters.
On Tuesday Mr Cameron said UK nationals fighting in Iraq and Syria could pose a “real threat” if they tried to return.
He also said he was committed to “rebuilding” UK relations with Iran.
Full diplomatic relations with Iran were suspended after attacks on the British embassy there in 2011. Britain and Iran both oppose the ISIS militants reports BBC.
Foreign Secretary William Hague said on Tuesday that “circumstances were right” for the British embassy in Iran to reopen following an improvement in bilateral relations in recent months.