The attackers stormed the site in Salaheddin province north of Baghdad at 0430 (0130 GMT), planting bombs in one of its units.

A fire broke out and the installation was badly damaged, officials said.

At one time Baiji was controlled by al-Qaeda, who used it to fund militants.

It is one of three major refineries in Iraq, the others being in the capital Baghdad and at Basra in the south.

It processes about 150,000 barrels of oil per day.

"The refinery has completely stopped," the governor of Salaheddin province, Ahmed al-Jubouri, told Reuters news agency.

"It's a big loss for the whole country. All Iraqi cities depend on its production."

It took 50 fire engines five hours to bring the fire under control, police said.

"Fixing the damage will take long time," an unnamed official at the refinery said.

"We are not talking about days, the damage is too severe."

But he added that it was hoped a partial restart could be made "in the next few days".