The victory, which could make it harder for militants to operate on both sides of the frontier, was also achieved with help from Kurds from the Syrian side of the frontier, a new sign of cooperation across the border.
Peshmerga fighters took control of the Rabia border crossing in a battle that began before dawn, an Iraqi Kurdish political source said.
"It's the most important strategic point for crossing," the source said.
The participation of Sunni tribal fighters in the battle against Islamic State could prove as important a development as the advance itself.
Members of the influential Shammar tribe, one of the largest in northwestern Iraq, joined the Kurds in the fighting, a tribal figure said.
"Rabia is completely liberated. All of the Shammar are with the Peshmerga, and there is full cooperation between us," Abdullah Yawar, a leading member of the tribe, told Reuters.
He said the cooperation was the result of an agreement with the president of Iraq's Kurdish region after three months of negotiation to join forces against the "common enemy".
Gaining support from Sunni tribes, many of which either supported or acquiesced in Islamic State's June advance, would be a crucial objective for the Iraqi government and its regional and Western allies in the fight against the insurgents.