A cabinet statement said a voluntary recruitment drive was necessary to fill shortages in squads in the west of Anbar province.
Thousands have fled Ramadi since its capture by IS on Sunday.
Meanwhile, the US National Security Council said it was considering "how best to support local ground forces".
Spokesman Alistair Baskey told AFP that some of the measures may include "accelerating the training and equipping of local tribes and supporting an Iraqi-led operation to retake Ramadi".
A more detailed announcement could come within days.
President Barack Obama has been briefed by advisers and "reaffirmed the strong US support" for Iraqi Prime Minister Haider al-Abadi.
Islamic State militants have been setting up defensive positions in Ramadi, witnesses say.
After a Council of Ministers meeting on Tuesday, the Iraqi prime minister vowed to prosecute forces who fled the city in the wake of the IS attacks.
Mr Abadi said the Iraqi people needed to "stand unified" and called for voluntary recruitment to the army. He also pledged to recruit and arm tribal fighters.
Fleeing Ramadi residents face tough choices
On the frontline in Anbar province
The council also issued a fresh plea to the international community to help Iraq's "war against terrorism".
The loss of Ramadi, capital of western Anbar province, is a blow for both the Iraqi government and US strategy in the area, says the BBC's Jim Muir in Beirut.
Retaking it is a massive challenge to the Iraqi government, which has had to appeal to the Shia militias despite risks of a sectarian backlash from sending them deep into the Sunni heartland, our correspondent adds.
Some 3,000 Shia militiamen are said to be "on standby" at Habbaniyah military camp, some 20km east of Ramadi, in preparation for an attempt to recapture the city.
The United Nations says some 25,000 people have fled the area in recent days, with many having to sleep in the open.
Streets in the city are deserted, but some shops have been forced to open by IS fighters.
Militants were also going door-to-door looking for government sympathisers and throwing bodies in the Euphrates river, residents said.
Iraq's government has called for volunteers to fight against Islamic State and help retake the city of Ramadi.