The jihadists punched back into the town they had lost a day earlier and swiftly retook several northern neighborhoods, the Syrian Observatory for Human Rights monitor said.

"IS started counter-attacking on Thursday night and retook more than 40 percent of the town of Albu Kamal," Rami Abdel Rahman, head of the Britain-based Observatory, told AFP.

Syrian regime forces and allied fighters had retaken the town, which lies on the border with Iraq in the eastern Deir Ezzor province, from the jihadists on Thursday.

Albu Kamal was the last significant town to have been under full IS control and lies at the heart of what used to be the sprawling "caliphate" the group declared in 2014 over swathes of Iraq and Syria.

"The jihadists went back in and retook several neighbourhoods in the north, northeast and northwest," Abdel Rahman said. "IS is trying to defend its last bastion."

The jihadist organisation has in the space of a few weeks seen its caliphate shrink to a small rump and lost major cities such as Mosul, Raqa and Deir Ezzor.

According to Syria state TV, regime and auxiliary forces had retaken full control of Albu Kamal by Thursday.

The Observatory 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.

- US-backed forces advance -

Losing the town, where IS leaders used to meet and were once considered untouchable, would cap a process which has seen the group relinquish any ambition as a land-holding force and return to the desert to fight a clandestine guerrilla war.

Many of the group's top leaders have been killed as Syrian and Iraqi forces with backing from Russia, Iran and a US-led coalition rolled back the territorial losses that saw the jihadists declare a "caliphate" roughly the size of Britain in 2014.

But the whereabouts of the first among them, self-proclaimed "caliph" Abu Bakr al-Baghdadi, remains unclear. He has been reported killed or wounded many times but IS has never offered any confirmation.

In Deir Ezzor province, which used to be the heartland of their proto-state, the group's remaining fighters only control about 30 percent of territory, most of it desert.

On the other bank of the Euphrates, coming from the north, the Kurdish-led US-backed forces that retook the IS "capital" of Raqa last month were also advancing on IS positions.

According to the Observatory, the Syrian Democratic Forces (SDF) retook four villages from IS there on Friday.

Kurdish-led fighters and Syrian troops will eventually square off when the last IS holdouts are flushed out, heightening the risk of a clash between the rival forces backed by the US and Russia respectively.

Observers have predicted the regime may seek to retake towns and cities wrested from IS by the SDF, such as the northern city of Raqa which the jihadists had used as their main Syrian hub.

The regime, with significant support from Hezbollah, Iran, Russia and various mostly Shiite militia groups from Iraq and even Afghanistan, has notched up victories in recent months.

It has reconquered many key areas that had once fallen to IS or rebel groups and now controls 52 percent of Syrian territory.

Fewer countries explicitly demand President Bashar al-Assad step down than at the beginning of the six-year-old Syrian conflict.

More than 330,000 people have been killed in Syria since the conflict began with anti-government protests in March 2011, which spiralled into a complex, multi-front war that drew in jihadists and armed forces from around the region and beyond.

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