US and Iraqi intelligence sources say an absence of official communication from the group's leadership and the loss of territory in Mosul suggest he has abandoned the city.
US and Iraqi officials believe the leader of Daesh, Abu Bakr al-Baghdadi, has left operational commanders behind with diehard followers to fight the battle of Mosul.
Officials say the leader is now hiding out in the desert, focusing mainly on his own survival.
It is impossible to confirm the whereabouts of al-Baghdadi, who declared himself the ruler of all Muslims from Mosul's Great Mosque, after his forces swept through northern Iraq in 2014.
But US and Iraqi intelligence sources say an absence of official communication from the group's leadership and the loss of territory in Mosul suggest he has abandoned the city.
He has proved to be an elusive target, rarely using communication that can be monitored, and moving constantly, often multiple times in a 24-hour cycle, sources said.
From their efforts to track him, they believe he hides mostly among sympathetic civilians in familiar desert villages, rather than with fighters in their barracks in urban areas where combat has been under way, they added.
At the height of its power two years ago, Daesh ruled over millions of people in territory running from northern Syria through towns and villages along the Tigris and Euphrates river valleys to the outskirts of Baghdad in Iraq.
US-backed Iraqi forces began an operation five months ago to recapture Mosul, a city at least four times the size of any other the group has held.
The biggest battle in Iraq since the US-led invasion of 2003, it has been slow going, in part because hundreds of thousands of civilians remain in harm's way.
The 100,000-strong Iraqi force fully captured the eastern half of Mosul in January, and commanders began an operation to cross the Tigris and take the western half last month.
Progress has since been steady, and the coalition says its victory is now inevitable, which would dismantle the caliphate in Iraq.
The intelligence sources point to a sharp drop in Daesh postings on social media as evidence that al-Baghdadi and his circle have become increasingly isolated.
Al-Baghdadi himself has not released a recorded speech since early November, two weeks after the start of the Mosul battle, when he called on his followers to fight the "unbelievers" and "make their blood flow as rivers."
Since then, sporadic Daesh statements mention attacks carried out by suicide bombers at various locations in Iraq and Syria, but place no particular emphasis on Mosul, despite the city being the main centre of fighting.
Neither al-Baghdadi nor any of his close aides released any comment on the fall of the eastern part of the city in January.