The Tabqa Dam, around 25 miles from the ISIS stronghold of Raqqa, would unleash a huge flood that would devastate much of Iraq and Syria if it was ruptured.
US led_coalition forces conducting airstrikes are acutely aware of the potential humanitarian disaster they face if they targeted the plant on the Euphrates River.
As such, the structure is being used to shelter 'very important prisoners' who are wanted by the U.S. and other governments, according to an official at Sound and Picture, an umbrella group of anti-ISIS activists in Syria.
Experts say the dam, which is 200 feet tall and roughly three miles long, would destroy large parts of Iraq and cut power to much of eastern Syria.
'That's an ecological disaster for Iraq and a humanitarian catastrophe for Syria,' Ariel Ahram, an associate professor at Virginia Tech who has studied Middle East dams, told the Wall Street Journal.
Middle East analysts and U.S. officials also fear the group could blow the dam up themselves as a last resort if they lose their grip on power.
ISIS lost the smaller Tishreen Dam, located downstream from Tabqa, in December after an alliance of Kurdish People's Protection Units and Arab armed groups carried out major operations in the area.
The Tsihreen dam, held by ISIS since 2014, helps generate electricity for large parts of the northern Aleppo province.
ISIS still controls swathes of territory on the western bank of the Euphrates River from Raqqa to Jarablus on the border with Turkey.
Mosul Dam
Similar fears about flooding were voiced over the Mosul Dam in Iraq earlier this month, with U.S. State Department officials warning that up to 500,000 people could be killed and more than a million left homeless if collapsed due to poor maintenance.
Rising water levels in spring, when the Tigris is swollen by rain and melting snow, could lead to the breach of the 2.2-mile long Mosul Dam, which was retaken from the ISIS by Iraqi and Kurdish forces more than 16 months ago.
In a call to Iraq's Prime Minister Haider al-Abadi, US president Barack Obama highlighted the need to make emergency repairs to avoid the tragedy.