The powerful Jaish al-Islam, or Army of Islam, has been locked in clashes with rival factions led by Al-Qaeda's Syrian affiliate in the opposition stronghold of Eastern Ghouta.
Observatory head Rami Abdel Rahman said nearly three weeks of fighting had killed more than 500 fighters and a dozen civilians.
One of the slain civilians has been identified as the only specialist gynaecologist still practising in Eastern Ghouta.
"This is absolutely a power struggle," Abdel Rahman said.
The Saudi-backed faction is one of the key rebel players in the High Negotiations Committee, which represents Syria's opposition in UN-backed peace talks.
But Jaish al-Islam has recently been challenged by Faylaq al-Rahman and Jaish al-Fustat, both led by Al-Nusra Front, Syria's Al-Qaeda affiliate.
Residents and local officials have tried to mediate an end to the clashes and have staged protests urging the rival forces to stop the bloodletting to no avail.
On Tuesday, a Jaish al-Islam spokesman said his faction was ready to put an end to the fighting based on an initiative by HNC head Riad Hijab.
Syria's fractured armed opposition movement has been ravaged by infighting, particularly between jihadist groups and their rivals.
More than 270,000 people have been killed and millions more been driven from their homes since the conflict began with protests against President Bashar al-Assad in 2011.
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