The Iraqi city of Mosul, which is held by Islamic State extremists, became the second terrorist hot spot to be declared off-limits to Australians under new counterterrorism laws aimed at deterring foreign fighters on Monday.

Australian Foreign Minister Julie Bishop said the Mosul district in northern Iraq had been declared a designated area under a section of the Criminal Code created in October.

That means that it is an offense under Australian law punishable by 10 years in prison to enter the district or to remain in it without a legitimate purpose.