With air cover from the US-led coalition, the Syrian Democratic Forces (SDF) were locked in clashes inside IS-held Tabqa on Wednesday, two days after entering the town for the first time.
They initially seized several positions in the town's south but have come up against fierce resistance from the jihadists, including with weaponised drones.
IS fighters "are dropping makeshift explosives from drones onto SDF positions," said Rami Abdel Rahman, who heads the Syrian Observatory for Human Rights.
In Iraq, IS has used small commercial drones to drop explosives on advancing forces around second city Mosul.
Fighting raged on Wednesday in Tabqa's southern neighbourhoods as SDF forces tried to build on their advance into the town on Monday.
"They are progressing slowly because it's all street battles. IS is using suicide attackers and car bombs and have riddled the town with mines," said Abdel Rahman.
The SDF launched their offensive on Tabqa in late March, when they and allied coalition troops were airlifted behind enemy lines.
The battle for Tabqa is a key phase of the broader offensive for Raqa, the Syrian heart of IS's so-called "caliphate" 55 kilometres (34 miles) to the east.
The Tabqa dam -- Syria's largest and just north of the town -- would also be an important prize for the SDF.
The assault on Raqa, dubbed "Wrath of the Euphrates," was launched in November and is backed by the US-led coalition's warplanes and special advisors.
Syria's conflict erupted in March 2011 with protests against the rule of President Bashar al-Assad, but it has since evolved into a multi-sided conflict that has witnessed the rise of jihadist groups.
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