BAGHDAD — Iraqi forces drove Islamic State militants out of the strategic oil refinery town of Beiji on Friday, handing a major defeat to the extremist group, which a U.N. panel said has denied food and medicine to hundreds of thousands of people and hidden its fighters among civilians since the start of a U.S.-led air campaign.

The recapture of Beiji is the latest in a series of setbacks for the jihadi group, which has lost hundreds of fighters to airstrikes in a stalled advance on the Syrian town of Kobani and whose leader was reportedly wounded in an airstrike earlier this month.

But as it has struggled to maintain momentum on the battlefield, it has redoubled efforts to present itself as a new Islamic caliphate, with plans to launch its own currency in the vast swaths of Syria and Iraq that are still under its control.

Two Iraqi security officials said government forces backed by allied militiamen captured the town of Beiji and lifted a months-long Islamic State siege on the refinery itself — Iraq’s largest — hoisting the country’s red, white and black flags atop the sprawling complex.

Reached by telephone in Beiji, they said the army used loudspeakers to warn the small number of residents still holed up in the town to stay indoors while bomb squads cleared booby-trapped houses and detonated roadside bombs.

The officials spoke on condition of anonymity because they were not authorized to speak to the media.

State-run television also reported the “liberation” of Beiji, quoting the top army commander there, Gen. Abdul-Wahab al-Saadi.

Islamic State extremists captured Beiji during the summer offensive in which they swept across much of northern Iraq and captured its second largest city Mosul. The Iraqi forces collapsed in the face of the onslaught but have since partially regrouped and gone on the offensive, with Beiji the biggest locality they have recaptured to date.