Militants boasted of the device on social media, with one even commenting on the destruction such a bomb would wreak in London, four months after the chemical was reported missing from Mosul University.
Among extremists making online threats to the West is British explosives expert Hamayun Tariq, who fled his home in Dudley, West Midlands, for the Middle East in 2012.
Using the Muslim name, Muslim-al-Britani, he posted on Twitter: 'O by the way Islamic State does have a Dirty bomb. We found some Radio active material from Mosul university,' the Mirror reports.
He continued: 'We’ll find out what dirty bombs are and what they do. We’ll also discuss what might happen if one actually went off in a public area.
'This sort of a bomb would be terribly destructive if went off In LONDON becuz (sic) it would be more of a disruptive than a destructive weapon,' before having his Twitter account suspended.
Other jihadis echoed the claims a destructive 'dirty bomb' had been made, with one writing: '
'IS has confirmed that we have acquired a dirty bomb from radioactive material from Mosul Uni! Mashallah #IS'.
In July nearly 40kg of uranium stored for scientific research went missing from Mosul University in northern Iraq.
In a letter to the United Nations, Iraq's U.N. Ambassador Mohamed Ali Alhakim told Ban Ki-moon 'Terrorist groups have seized control of nuclear material at the sites that came out of the control of the state,' adding such materials 'can be used in manufacturing weapons of mass destruction.'
'These nuclear materials, despite the limited amounts mentioned, can enable terrorist groups, with the availability of the required expertise, to use it separate or in combination with other materials in its terrorist acts.'
Yesterday, as news the uranium had been used to construct a bomb, one jihadi taunted Iraq's reported plans to retake control of Mosul.
'Plan to retake Mosul from ISIS emerges, haha! Little do they know the resources of #IS! Good luck!' they wrote.
Earlier this year, Tariq claimed to have had his passport cancelled by the Home Office after travelling to the Middle East.
The former car mechanic fled to Pakistan almost immediately after being released from prison in 2012.
After pledging his allegiance to the Taliban, he claimed to have been recruited by IS fighters who paid for him to travel to Syria to join them.