Daesh militants have entered the key Syria-Turkey border town of Kobane and taken control of three districts after street-to-street fighting with Syrian Kurd defenders.
Daesh fighters entered the eastern districts on Monday, raising their black flag on buildings and hills, according to BBC.
Local officials said about 2,000 civilians fled to the Turkish border.
Taking Kobane, besieged for three weeks, would give Daesh control of a long stretch of the Syrian-Turkish border.
More than 160,000 Syrians, mainly Kurds, have fled the town.
Earlier a local official in Kobane, Idriss Nassan, told the BBC that the town would "certainly fall soon".
He confirmed Daesh was now in control of Mistenur, the strategic hill above the town and that there was heavy shelling. Kobane is now besieged on three sides.
Aircraft from the US-led coalition are reported to have conducted a large air strike in the area at 04:00 (01:00 GMT) on Tuesday, though it is not known what the target was.
Karwan Zebari, a representative of the Kurdish regional government in the US, told the BBC it would be catastrophic if Daesh seized control of the town.
Speaking on Monday, Asya Abdullah, a co-leader of the Kurdish Democratic Union Party representing Syrian Kurds in Kobane, described the fighting to the BBC's Newshour program.
She said: "There are still thousands of civilians in the city and Daesh is using heavy weapons. If they are not stopped now, there will be a big massacre.
"They have surrounded us almost from every side with their tanks. They have been shelling the city with heavy weapons. Kurdish fighters are resisting as much as they can with the limited weapons they have".