Iraqi PM Haider al-Abadi has said that ISIS will be ousted from the country after government forces recaptured Ramadi.
Speaking on television, Mr Abadi vowed to retake Iraq's second city of Mosul, saying it would be "the fatal and final blow" to IS.
The recapture of Ramadi was welcomed by US Secretary of State John Kerry, who said IS had suffered a major defeat.
The jihadists seized Ramadi in May, in an embarrassing defeat for the army.
Iraqi government forces have been fighting to retake the city - about 90km west of the capital, Baghdad - for weeks.
Meanwhile other reports suggest that the fight in Ramadi is not yet over. An Iraqi military commander yesterday announced that the city had been fully liberated but another official later clarified that Iraqi special forces had only retaken the government building.
Iraqi state TV showed troops, some waving Iraqi flags and others brandishing machine guns, chanting and dancing inside what it described as the government complex. Soldiers could be seen slaughtering sheep in celebration near heavily damaged buildings.
Col. Steve Warren, a U.S. military spokesman in Baghdad, told AP that "today's success is a proud moment for Iraq."
"The clearance of the government center is a significant accomplishment and is the result of many months of hard work by the Iraqi army, the counterterrorism service, the Iraqi air force, local and federal police, and tribal fighters," Warren said.
He said the U.S.-led coalition has carried out more than 630 airstrikes, in addition to training security forces and providing both advice and equipment to clear bombs and booby traps.
Gen. Lloyd J. Austin III, the head of the U.S. Central Command, congratulated Iraqi forces on the "important operational achievement."
"Coupled with other recent ISIL losses across Iraq and Syria... the seizure of the Government Center clearly demonstrates that the enemy is losing momentum as they steadily cede territory," he said in a statement, using an acronym for the IS group.
An Iraqi military officer told the AP that the militants had retreated from the government complex to other parts of the city.
"We were totally surprised today," the officer said, speaking on condition of anonymity because he was not authorized to brief the press.
"We didn't expect them to retreat from a number of Ramadi areas today, where we entered without any resistance, as if they evaporated," he said.
Al-Belawi said the fighters retreated mainly to the eastern neighborhoods of Sijariya and Sufiya. Authorities did not provide casualty figures from the fighting.
The recapture of the government complex should lift the morale of Iraqi forces, who were badly shaken by the fall of the city in May, which came despite months of U.S.-led airstrikes and advances against IS elsewhere in the country.
Iraqi Prime Minister Haider al-Abadi delivered a speech in which he hailed the advance, saying it had killed "hundreds" of militants and "fulfilled the promise to defeat Daesh in Ramadi," referring to the IS group by its Arabic acronym. He said 2016 would be "the year of the final victory and the end of the existence of Daesh on Iraqi territory."
U.S. Secretary of State John Kerry congratulated Iraqi forces for "displaying tremendous perseverance and courage."
"While Ramadi is not yet fully secure and additional parts of the city still must be retaken, Iraq's national flag now flies above the provincial government center and enemy forces have suffered a major defeat," he said in a statement.
The IS group still controls much of northern and western Iraq, as well as vast swaths of neighboring Syria. It has declared a caliphate in the areas under its control and imposed a harsh and violent interpretation of Islamic law.
Ramadi and Fallujah, Sunni Arab cities where distrust of the Shiite-led government runs deep, were major bastions of the insurgency in the years after the 2003 U.S.-led invasion. The capture of Ramadi would be a major victory for Iraqi troops, but would also test the government's ability to bridge the country's sectarian divide.