The mass grave found on Wednesday contains the bodies of 73 people, local official Chokor Melhem Elias said.
"Men, women and children executed by the Islamic State group when they controlled the region," Elias added.
The discovery was made in the Rambussi area near Qahtaniyya.
The Islamic State group has killed thousands of Yazidis in Sinjar, and kidnapped thousands of the minority groups women and girls as sex slaves, with the United Nations estimating 3,000 currently in captivity.
The northwestern town is infamous as the site of one of the Islamic State group's worst atrocities, when it killed thousands of Yazidi men and abducted thousands of women and girls as sex slaves in 2014.
Tens of thousands of civilians fled into the nearby mountains in appalling conditions, helping to trigger US intervention against the militants.
Earlier in the month, mass graves were found in Hawija, northern Iraq containing at least 400 suspected IS victims executed.
Kurdish forces captured Sinjar from the Islamic State group in 2015, but the town was seized by Iraqi forces following the northern region’s independence referendum.
Sinjar and Kirkuk form part of a swathe of historically Kurdish-majority territory that the Kurds want to incorporate in their autonomous region in the north against the wishes of Baghdad.
Several of them were taken over by the Kurds in 2014 when many units of the Iraqi army disintegrated in the face of the IS militants' lightning advance through areas north and west of Baghdad.