Backed by tanks and mortar fire, forces loyal to Libya's Government of National Accord (GNA) retook "District Two" of central Sirte, military officials said.
The advance came a day after the loyalists cleared and demined areas of the city captured in earlier clashes.
An AFP photographer said the assault on District Two was mounted in a west-to-east direction and led by tanks opening the way for infantry.
"District Two has been liberated," Reda Issa, a spokesman for the pro-government forces, told AFP.
Loyalist forces have been pushing to clear Sirte of the jihadists since expelling them from key positions including their headquarters at the Ouagadougou conference centre last week.
IS seized control of Sirte, the hometown of ex-dictator Moamer Kadhafi, in June of last year, taking advantage of the chaos that followed the longtime Libyan leader's ouster and killing in 2011.
Officials said on Sunday that only a single residential area, named District One, remained under full IS control, while fighting was ongoing in Districts Two and Three.
Washington earlier this month launched air strikes on IS positions in Sirte in support of the operations, after the jihadists' seizure of the city sparked fears that it would be used as a springboard for attacks on Europe across the Mediterranean.
More than 300 pro-government fighters have been killed and 1,800 wounded in the three-month-old battle for Sirte, according to an official casualty toll. The jihadists have not revealed their losses.
Loyalist forces have said they will only declare Sirte "fully liberated" once all jihadists have been cleared from the city.
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