Sirte, on Libya's Mediterranean coast, was the last significant IS-held territory in the north African country
"Our forces have total control of Sirte," after more than six months of fighting, Reda Issa, a spokesman for pro-government forces, told AFP.
"Our forces saw Daesh totally collapsing," he said, using an Arabic acronym for the group.
Sirte, on Libya's Mediterranean coast, was the last significant IS-held territory in the north African country.
Forces allied with the country's unity government launched an offensive to retake the city on May 12, quickly seizing large areas of the city and cornering the jihadists.
But IS put up fierce resistance with suicide car bombings, snipers and improvised explosive devices.
The United States started a bombing campaign in August at the request of the UN-backed Government of National Accord (GNA) to help local forces recapture the city, seized by jihadists in June 2015.
"Daesh has totally collapsed and dozens of them have given themselves up to our forces," said a statement on the loyalist forces' official Facebook page on Monday.
The fall of Sirte -- the hometown of the slain dictator Moamer Kadhafi -- represents a significant blow to the jihadists, who have also faced major setbacks in Syria and Iraq.