The Syrian Observatory for Human Rights said "fierce clashes" between loyalist forces and opposition fighters were taking place one kilometre west of Khan Sheikhoun in Idlib province.
The latest fighting broke out overnight Saturday to Sunday and has already killed at least 45 opposition fighters as well as 17 members of the pro-regime forces, the Britain-based monitor said.
The town of Khan Sheikhoun lies on a key highway coveted by the regime.
The road runs through Idlib, connecting government-held Damascus with the northern city of Aleppo, which was retaken by loyalists from rebels in December 2016.
Pro-regime forces are deployed around three kilometres from the road and have been advancing over the past few days in a bid to encircle Khan Sheikhoun from the north and the west and seize the highway.
On Sunday they retook the village of Tel al-Nar and nearby farmland northwest of Khan Sheikhoun "and were moving close to the highway," Observatory head Rami Abdel Rahman said.
But their advance from the east was being slowed down due to "a ferocious resistance" from jihadists and allied rebels.
Syria's former Al-Qaeda affiliate Hayat Tahrir al-Sham (HTS) controls most of Idlib province as well as parts of the neighbouring provinces of Hama, Aleppo and Latakia.
A buffer zone deal brokered by Russia and Turkey last year was supposed to protect the Idlib region's three million inhabitants from an all-out regime offensive, but it was never fully implemented.
Regime and Russian airstrikes and shelling since late April have killed more than 860 civilians, according to the Observatory, which relies on sources inside Syria for its information.
On Sunday airstrikes by the Syrian regime and its ally Russia killed two people, including a child, in the south of Idlib, the Observatory said.
More than 1,400 insurgents and over 1,200 pro-regime forces have been killed since April, according to the monitor.
The violence has displaced more than 400,000 people, the United Nations says.
Khan Sheikhoun was hit by a chemical attack that killed more than 80 people in April 2017, attributed to the Syrian regime by the UN and international experts.
In response, US President Donald Trump ordered strikes on the regime's key Shayrat airbase.
Now almost emptied of inhabitants, Khan Sheikhoun sheltered almost 100,000 people before the start of the current military escalation, the majority displaced from Hama province.
"Many of these people have been displaced up to five times," the UN's regional spokesman for the Syria crisis, David Swanson, told AFP on Saturday.
Syria's conflict has killed more than 370,000 people and displaced millions at home and abroad since starting with the brutal repression of anti-regime protests in 2011.
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