US-backed Syrian fighters are reported to have overrun an encampment that made up most of the last patch of territory held by the Islamic State group.
The Syrian Democratic Forces (SDF) alliance said militants refusing to surrender had pulled back to a sliver of land along the River Euphrates south of Baghuz, and that clashes continued.
Although it warned the battle was not over, some fighters began celebrating.
Baghuz’s fall would bring an end to the “caliphate” proclaimed by IS in 2014.
The jihadist group once controlled 88,000 sq km (34,000 sq miles) of land stretching across Syria and Iraq, imposed its rule on almost eight million people, and generated billions of dollars from oil, extortion, robbery and kidnapping.
After five years of bloody battles, local forces backed by world powers have driven IS out of all but a few hundred square metres.
But the group is by no means defeated. US officials believe IS may have 15,000 to 20,000 armed adherents active in the region, many of them in sleeper cells, and that it will return to its insurgent roots while attempting to rebuild.