The jihadists, notorious for demolishing archaeological treasures since declaring a "caliphate" last year straddling Iraq and Syria, appeared to have fought their way into Palmyra on foot after breaking through in the city's north.
It was unclear if they had reached Palmyra's UNESCO-listed heritage site, including ancient temples and colonnaded streets, and its adjacent museum housing priceless artefacts, located in the city's southwest.
"IS controls almost all of Palmyra" following the withdrawal of government troops from all sectors except for a prison in the east and military intelligence headquarters in the west, said Rami Abdel Rahman of the Syrian Observatory for Human Rights.
Government warplanes responded by carrying out air strikes on IS positions in the city.
News of Palmyra's fall came shortly after a State Department official said the weekend loss of Ramadi had prompted the United States to take an "extremely hard look" at its strategy to confront the extremists.
"The situation is very bad," Syria's antiquities chief, Mamoun Abdulkarim, said after IS had captured the city's northern third earlier in the day.
The head of the UN cultural agency, Irina Bokova, has warned that the fighting in Palmyra was "putting at risk one of the most significant sites in the Middle East".
Hundreds of statues and artefacts from Palmyra's museum have been transferred out of the city, according to Abdulkarim, but many others -- including massive tombs -- could not be moved.
The jihadists already sparked international outrage this year when they blew up the ancient Assyrian city of Nimrud and smashed artefacts in the museum of Mosul, both in Iraq.
Homsi, the Palmyra activist, said the fleeing regime soldiers "headed to the military intelligence headquarters near the ruins".
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