Islamic State group jihadists have recaptured nearly all of Albu Kamal, putting up a fierce fightback for what had been the last significant Syrian town under their control, a monitor said Saturday.
Syrian regime forces and allied militia overran Albu Kamal, which lies on the border with Iraq, on Thursday but have since faced a string of IS counter-attacks.
On Saturday, the Syrian Observatory for Human Rights said IS had "ambushed" the attacking forces and managed to oust them from most of the town.
"IS has almost completely retaken control of Albu Kamal, pushing pro-regime forces to its southern and eastern edges," said Rami Abdel Rahman, head of the Britain-based monitor.
Clashes were still raging there on Saturday, he said.
IS began counter-attacking on Thursday night, swiftly retaking several northern districts of Albu Kamal from pro-government fighters.
"It was Daesh's biggest ambush operation, tricking the attacking forces into thinking they had controlled the city," Abdel Rahman said, using the Arabic acronym for IS.
Albu Kamal lies at the heart of what used to be the sprawling "caliphate" that IS declared in 2014 across swathes of Iraq and Syria.
Losing it completely would have capped the group's reversion to an underground guerrilla organisation with no urban base.
Russian-backed Syrian regime forces and allied fighters had steadily advanced on Albu Kamal from the south and west for weeks, while Iraqi forces had closed in on the border area from the east.
The Observatory has said most of the fighting was done by the Lebanese Shiite group Hezbollah and elite forces from its backer Tehran, as well as militia groups from Iraq.
On Saturday, Abdel Rahman said Albu Kamal was being pummelled by air strikes, but he could not specify whether they were Iraqi or Russian raids.
Across the border on Saturday, Iraqi forces launched an assault to capture the last pocket of IS territory in their country.
The Euphrates valley town of Rawa and nearby villages were bypassed by government troops and allied militia when they retook the border town of Al-Qaim last week.