Mohammed Shia al-Sudani said the Sunni militants had also buried alive some of their victims, including women and children. Some 300 women were kidnapped as slaves, he added.
"We have striking evidence obtained from Yazidis fleeing Sinjar and some who escaped death, and also crime scene images that show indisputably that the gangs of the Islamic States have executed at least 500 Yazidis after seizing Sinjar," Sudani told Reuters.
Sinjar is the ancient home of the Yazidis, one of the towns captured by the Sunni militants who view the community as "devil worshipers".
"Some of the victims, including women and children were buried alive in scattered mass graves in and around Sinjar," Sudani said.
The Islamic State, which has declared a caliphate in parts of Iraq and Syria, has prompted tens of thousands of Yazidis and Christians to flee for their lives during their push to within a 30-minute drive of the Kurdish regional capital Arbil.
The Yazidis, followers of an ancient religion derived from Zoroastrianism, are spread over northern Iraq and are part of the country's Kurdish minority.
A deadline passed at midday on Sunday for 300 Yazidi families to convert to Islam or face death at the hands of the Islamic State. It was not immediately clear whether the Iraqi minister was talking about the fate of those families or others in the conflict.
The militant group, which arrived in northern Iraq in June, has routed Kurds in its latest advance, seizing several towns, a fifth oilfield and Iraq's biggest dam - possibly gaining the ability to flood cities and cut off water and power supplies.