The insurgents had seized a couple of strategic areas in western Aleppo after launching an offensive on Oct 28 in an attempt to break the siege imposed in July on rebel-held eastern Aleppo, which has also been targeted by waves of Syrian and Russian airstrikes.
Russia said last month that it would halt the airstrikes on the city and urged insurgents to leave. But the fighters, including members of the al-Qaida-linked Fatah al-Sham Front, refused to leave after the government opened corridors for them to cross to the nearby province of Idlib, an insurgent stronghold.
"The epic battle for Aleppo has failed," said the Observatory's chief Rami Abdurrahman, using the term that the insurgents had assigned to the offensive.
Syrian state media reported that the two districts have been retaken. State TV reported live from inside Minyan, which appeared to be under the firm control of government troops.
"We fought them in every street, house, neighborhood and schools, and they used mosques to launch attacks," an army brigadier general in Minyan who identified himself as Nabil told Al-Manar TV.
The Observatory said the fighting left 508 dead, including civilians and fighters from both sides.
It said the dead insurgents included 90 foreign fighters while on the government side, 83 troops, 28 Hezbollah gunmen and 41 other fighters from Iran and Iraq were killed as well.
On Thursday, Jan Egeland, the special adviser to the UN envoy for Syria, said the last food rations in besieged eastern Aleppo will run out by next week.
Speaking in Geneva, Egeland said the last time the more than 250,000 people inside east Aleppo received any humanitarian aid was in the beginning of July.
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