Soldiers allied to the Western-backed Somali government said they killed seven insurgents from a faction loyal to the
The soldiers from the semi-autonomous region of Puntland are part of a force headed to the port town of Qandala, which has been under the control of the insurgents since November.
"We killed seven IS and took their guns - now we are in the village," Captain Mohamed Saiid, head of a Puntland military unit, told Reuters by satellite phone from the scene.
"The IS fighters retreated into a hill outside the village. Three soldiers were injured from our side. We shall keep on pursuing the fighters till we eliminate them from Qandala."
The insurgents are thought to number in the low hundreds and are led by Abdiqadir Mumin, who broke away from the main al Shabaab insurgency last year and swore allegiance to Islamic State.
His group has no known operational links to Islamic State in the Middle East and Qandala is the first town where they took control.
Al Shabaab is fighting the shaky U.N.-backed government to impose a strict interpretation of Islamic law in Somalia, which has been at war for more than 25 years.