US-backed fighters battle to dislodge militants from key military base north of Raqqa city
The Syrian Democratic Forces [SDF] entered IS' bastion Raqqa from the east and west, but have struggled to capture the Division 17 military base on the northern outskirts of the city.
"Blasts could be heard throughout the night because of the exchange of fire between the two sides," the monitoring group said.
Observatory head Rami Abdel Rahman said IS had "heavily fortified" the base in anticipation of a ferocious SDF assault on it.
The SDF launched a renewed attack on Division 17 overnight with backing from the US-led coalition bombing IS, the Syrian Observatory for Human Rights said.
Originally a Syrian army base, Division 17 was seized by IS in 2014 as it took control of swathes of the wider Raqqa province.
After its capture by the militants the same year, Raqqa city emerged as a key hub for IS' operations in Syria, neighbouring Iraq, and beyond.
The SDF - an Arab-Kurdish alliance formed in 2015 - spent seven months tightening the noose on Raqqa city before finally entering it this week.
It has since captured the district of al-Meshleb in the city's east, as well as parts of the western neighbourhoods of al-Sabahiya and al-Romaniya.
Al-Meshleb is one of the more built-up residential neighbourhoods in the east of the city, while most other districts nearby are made up of markets and small shops.
An estimated 300,000 civilians were believed to have been living under IS rule in Raqqa, including 80,000 displaced from other parts of Syria.
Thousands have fled in recent months, and the UN humanitarian office estimates about 160,000 people remain in the city.
Reports of civilian casualties among those still living inside have swelled in recent weeks.