Fighters from the Kurdish People's Protection Units (YPG) had entered Tal Hamis and captured parts of the town after six days of clashes with the jihadists, the Britain-based group said.
The town is northeast of the provincial capital, Hasakeh city, and has been under IS control for more than a year.
Observatory director Rami Abdel Rahman said the town was "one of the most important strongholds" of the group in the region.
Since the clashes began Saturday, at least 175 IS fighters have been killed by the Kurds and air strikes by a the US-led coalition.
Additionally, 30 fighters from the YPG and Arab rebel units fighting alongside them have been killed. Among the dead was an Australian, the first Westerner to die in a Kurdish unit in Syria.
The Pentagon said the coalition had carried out several air strikes in Hasakeh province Thursday, including three near Hasakeh city and three near Tal Hamis.
The offensive, in which IS also seized 10 villages, has prompted a mass exodus of an estimated 5,000 residents to the cities of Qamishli and Hasakeh.
Jean Tolo, an official with the Assyrian Organisation for Relief and Development in Qamishli said the pace of arrivals had slowed by Friday.
"We are offering the displaced food and everything they need," he told AFP by telephone.
"There are doctors working for free ready to deal with any emergency," he added, saying around 200 Assyrian families were sheltering in Qamishli with another 900 in Hasakeh city.
More than 210,00 people have been killed in Syria since the conflict began in March 2011.
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