BAGHDAD (Reuters) - Iraqi Prime Minister Haider al-Abadi asked Kurdish leader Massoud Barzani not to exploit the war on Islamic State to expand the Kurds' territory, according to a government statement published after their meeting on Thursday in Baghdad.

The meeting discussed the preparation for the battle to dislodge Islamic State from Mosul, the largest city under the ultra-hardline Sunni group's control, in northern Iraq.

Kurdish Peshmerga forces are expected to take part in the assault on the city that Abadi wants to retake this year, with the backing of a U.S.-led coalition.

"The aim of the battle should not be territorial conflicts but to free the citizens from the persecution of Daesh," said Abadi, according to the statement.

Barzani's Kurdish Regional Government has already expanded its control to Kirkuk, an oil-rich region historically claimed by the Kurds, after the Iraqi army collapsed in the face of Islamic State's sweeping advance two years ago.

The Kurds also expanded their military presence in the area around Mosul, just west of their regional capital Erbil.

The Peshmerga are deployed east, north and northwest of Mosul while Iraqi government forces have been gradually progressing from the south, tightening the noose around the city that had a pre-war population of about 2 million.

It was from Mosul's Grand Mosque that Islamic State leader Abu Bakr al-Baghdadi declared a caliphate over parts of Iraq and Syria in July 2014.

(Reporting by Ahmed Rasheed; Writing by Maher Chmaytelli; Editing by Dominic Evans)