Syria's army and its allies advanced towards the northern Islamic-State held city of al-Bab on Monday, cutting off the last main supply route that connects to militant strongholds further east towards Iraq, a monitor said.
The Syrian Observatory for Human Rights, a British-based group monitoring the war, said the army and the Lebanese Hezbollah group made gains southeast of al-Bab overnight.
Backed by air strikes, government forces and their allies severed the main road that links the city near the Turkish border to other IS-held territory in Raqqa and Deir al-Zor provinces.
Islamic State militants are now effectively besieged in the area, by the army from the south and by Turkish-backed rebels from the north, as Damascus and Ankara race to capture the largest IS stronghold in Aleppo province.
The Syrian army's advance towards al-Bab risks triggering a confrontation with the Turkish military and its allies, groups fighting under the Free Syria Army banner, which have been waging their own campaign to take the city.
In less than three weeks, Syrian army units moved to within 5 km (3 miles) of al-Bab, as Damascus seeks to stop its neighbor, Turkey, penetrating deeper into a strategic area of northern Syria.
Northern Syria is one of the most complicated battlefields of the multi-sided Syrian war, with Islamic State now being fought there by the Syrian army, Turkey and its rebel allies, and an alliance of U.S.-backed Syrian militias.
Turkey launched its campaign in August in Syria, "Euphrates Shield", in order to secure its frontier from Islamic State and halt the advance of the powerful Kurdish YPG militia.
Turkish troops and FSA rebels clashed heavily with IS militants around the town of Bazaa, east of al-Bab, in recent days, the Observatory said. Turkish-backed forces had briefly captured the town before Islamic State suicide bombers pushed them out on Saturday.
The Observatory also reported fighting south of al-Bab on Monday between government forces and Islamic State.
Al-Bab sits 40 km (25 miles) northeast of Aleppo, where the government defeated rebels in December, its most important gain of the nearly six-year-old war.