Turkey's state-run Anadolu Agency reported that rebels had overrun the centre of the town, which had been a key IS stronghold just 25 kilometres south of the border.
"We are announcing Al-Bab completely liberated, and we are now clearing mines from the residential neighbourhoods," said Ahmad Othman, commander of the Sultan Mourad rebel group.
"After hours of fighting, we chased out the last remaining IS rank and file that were collapsing after the fierce shelling of their positions," he added.
The rebels launched their offensive to capture Al-Bab last year with the support of Turkish ground troops, artillery and air strikes.
Field commanders from two other rebel factions in the town confirmed the news to AFP.
"Yesterday (Wednesday), we captured the city centre, which was IS's security zone... The jihadists collapsed, and this morning around 6 am (0400 GMT) we completed the operation," said Saif Abu Bakr, who heads the Al-Hamza rebel group.
"Dozens of IS fighters were killed and we evacuated more than 50 families from inside Al-Bab," Abu Jaafar said.
Turkey sent troops into Syria in August last year in an operation it said targeted not only IS but also US-backed Kurdish fighters it regards as terrorists.
The battle for Al-Bab has been the bloodiest of the campaign with most of the 69 Turkish soldiers killed dying there.
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