Around 400,000 civilians, or a quartre of Mosul's pre-war population, are trapped in the Old City, according to UN estimates.
While as many as half a million are estimated to remain in neighbourhoods still under the control in western Mosul.
Lise Grande, UN humanitarian coordinator for Iraq, said: “If there is a siege and hundreds of thousands of people don't have water and don't have food, they will be at enormous risk.
The UN believes a humanitarian catastrophe could occur in Mosul in the fight against ISIS
Iraqi forces advancing on Mosul
"We could be facing a humanitarian catastrophe, perhaps the worst in the entire conflict."
Ms Grande comments come as Iraqi forces continue to advance on the Old City, capturing the Iron Bridge which links eastern Mosul with the western part of the city last month.
The US-backed forces have surrounded the militants in the northwestern quarter including the historic Old City.
Chilling photographs released from Mosul
Thu, March 16, 2017
U.S.-backed Iraqi forces push further into the Islamic State-held western half of Mosul, capturing a damaged bridge which could link up their units on either side of the Tigris river
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An Iraqi special forces soldier checks men for explosive belts as they cross from Islamic State controlled part of Mosul to Iraqi forces controlled part of Mosul
We could be facing a humanitarian catastrophe, perhaps the worst in the entire conflict
But the jihadis have tried to counter the offensive with booby traps and occasionally using shells filled with toxic gas.
Ms Grande added: "It is a deteriorating situation, we fear for the lives of the 400,000 people in the old city.
"Families… tell us that they are being shot at as they are escaping. It's terrifying."
Residents who have managed to escape from the Old City have said there is almost nothing to eat but flour mixed with water and boiled wheat grain as most food is kept for ISIS members and their supporters.
Scenes from the battle against ISIS in Mosul
The Iraqi government now has its sights set on taking the Nuri Mosque, where the Islamic States’s leader Abu Bakr al-Baghdadi declared his so-called caliphate in 2014.
But the army’s progress has been slow because the militants have hidden themselves among civilians.
Ms Grande said: “The security forces know the situation on the ground and they need to decide how this is best done, whether by evacuating civilians or protecting them in their homes or opening routes they can escape through.”
So far it is estimated that the fight against ISIS has killed several thousands among civilians and fighters on both sides, according to aid organisations.