Special forces, soldiers, police, border guards and volunteer forces are involved in the operation to retake the Anbar province town, Iraq's Joint Operations Command said in a statement reported by AFP.
Tanks and artillery are taking part in the operation, which is also backed by air support from Iraqi forces. Rutba, located in western Anbar province along the main road to Jordan, has been held by Daesh since 2014.
Daesh overran large areas north and west of Baghdad in June of that year, and later made further advances in Anbar, seizing its capital Ramadi in 2015.
Iraqi forces have since regained significant ground from the extremists, securing the Ramadi area earlier this year and retaking the town of Heet last month.
But parts of Anbar -- including its second city Fallujah -- are still under Daesh control, as is most of Nineveh province, to its north.
And the extremists are still able to carry out bombings in government-held areas -- something they did more frequently prior to the June 2014 offensive.
As Daesh continues to lose ground, it has in recent weeks stepped up its campaign of bombings, including three the same day in Baghdad that killed nearly 100 people.