"The defeat of ISIS in Mosul doesn't mean that ISIS is finished in Iraq and there is still tough fighting ahead," Townsend told CNN's Wolf Blitzer.
"We will continue to perform our mission," he added, referring to the international military advisory effort.
Townsend said that ISIS held areas including Tal Afar and western Anbar province would need to be dealt with, but said that for now, the coalition's top priority was driving ISIS out of the caliphate's one-time capital, Raqqa, Syria.
"About an hour ago what was job number two for us, Raqqa Syria, is now job number one," Townsend said, referring to the recapture of Mosul.
Backed by US air and artillery strikes, the coalition-supported Syrian Democratic Forces, a mixed group of Kurdish and Arab fighters, have recently encircled Raqqa, breaching the wall that surrounds the old city.
Townsend was confident that Raqqa would be captured but declined to put a timeline on the battle's duration.
"I won't hazard a guess," he said.
But even if Raqqa is recaptured, US and coalition military officials have acknowledged that ISIS has shifted some of its command and control functions to more remote towns and areas along the Euphrates River Valley.
Even as the coalition released a statement Monday congratulating Iraqi troops on their victory, it acknowledged that areas of Old Mosul needed to be back-cleared of explosive devices and warned of "possible ISIS fighters in hiding."
Asked if Iraq was prepared to secure Mosul after nine months of heavy fighting that left thousands dead and much of the city's infrastructure destroyed, Townsend said: "I do believe that the Iraqi security forces have what it takes to hold Mosul."
Mosul is Iraq's second largest city with some estimating the cost of rebuilding to exceed $1 billion.
Some analysts have questioned whether the Iraqi government is positioned to secure the military's recent gains given its limited resources as the country struggles to fight a costly war while oil prices are low.
"They have a plan to hold the city even as they prosecute missions against ISIS elsewhere in Iraq," he added.
Coalition military officials have pointed to East Mosul which was recaptured in January as evidence that the Iraqi security forces are able to secure big cities with life returning to some sense of normalcy after capture.
"East Mosul is nothing short of a miracle," Canadian Brig. Gen. D.J. Anderson, told reporters at the Pentagon last week.
Anderson, who oversees the coalition training efforts of Iraqi forces, added that "the hold force has been doing a good job. It's a combination of army and local police but increasing the local police are taking the forefront in that."
But he acknowledged that West Mosul would present additional challenges.
"Eastern Mosul and western Mosul are very, very different," he said, adding, "ISIS is, as it's got more desperate, has left more of a trail of destruction behind them and so that will be a different challenge in terms of people coming back to their homes, restoring normalcy, et cetera."
Townsend went on to praise the efficacy of Iraqi troops, particularly compared to their performance three years ago, when ISIS drove the much better equipped troops from Mosul and even threatened to march on Baghdad.
"This is a very different army and security forces than existed three years ago," he said.
Townsend also said it was critical that the various Iraqi security forces that that participated in the fight, including Iraqi Sunni and Shia troops as well as Kurdish Peshmerga fighters, stay united in the fight against ISIS.
"They are pretty united right now, there's a lot of celebrating going on Iraq wide right now," he said, while adding, "This country has to pull together, this society has to pull together if they're going to prevent ISIS or the ISIS-next from returning."