The Syrian Democratic Forces were now in full control of Al-Shadadi in Hasakeh province, the Britain-based Syrian Observatory for Human Rights monitor said.
The Observatory said IS forces had withdrawn south of the town, and SDF fighters were engaged in "mopping up" operations outside Al-Shadadi.
Observatory chief Rami Abdel Rahman said the town's capture was due in large part to heavy US-led air strikes.
The SDF began a new operation in Hasakeh province on Tuesday, and had been advancing towards Al-Shadadi in recent days.
The SDF is an alliance of Kurdish fighters from the People's Protection Units (YPG) and Arab forces, although the Kurds dominate the coalition.
It has successfully battled IS elsewhere in Hasakeh, with support from the US-led coalition that began strikes in Syria in September 2014.
It is also waging a major operation in Aleppo province where it has seized key territory from Syrian rebels.
Those advances have angered Turkey, which accuses the YPG of being the Syrian affiliate of the Kurdistan Workers' Party, an outlawed group that has waged a decades-long insurgency against Ankara.
