The Britain-based Syrian Observatory for Human Rights said 120 IS fighters “were killed in clashes in and around the town of Uqayribat in the eastern Hama countryside… along with at least 35 regime troops and loyalist militiamen.”
The town is the jihadist group’s last bastion in the central province apart from a handful of small villages.
Pro-government forces seized Uqayribat on Friday night, but IS responded with a counter-offensive on Saturday that left it in control of most of the town, Observatory chief Rami Abdel Rahman said.
An intense barrage of artillery fire and Syrian and Russian air strikes on jihadist positions allowed pro-regime forces on Sunday morning to push the jihadists back out of the town and advance on villages to the west that remain under IS control.
IS has controlled Uqayribat since 2014, using it to launch attacks on regime-held areas and a strategically vital road Abdel Rahman described as “the only lifeline for the regime between Aleppo and central and southern Syria”.
Regime forces, backed by heavy Russian air strikes, launched a major assault on IS-held parts of Hama in June.
“By consolidating their control of (Uqayribat) and ousting IS from the surrounding villages, regime forces could oust the organisation from the whole of Hama province,” Abdel Rahman said.
Other rebel groups still control parts of the province’s rural north.
Hama, which borders on six other Syrian provinces, is strategically vital to the Assad regime, separating opposition forces in Idlib from Damascus to the south and the regime’s coastal heartlands to the west.
IS has suffered multiple defeats across Syria and neighbouring Iraq in recent months, notably in its main Syrian base of Raqa.
On Friday a US-backed Kurdish-Arab coalition seized Raqa’s Old City and was advancing on the jihadists in the heavily defended city centre.
The Syrian Democratic Forces (SDF) began their offensive in May, capturing the city of Tabqa and a key dam nearby before entering Raqa city in early June.
Meanwhile, pro-regime forces have advanced against IS in the eastern part of Homs province and western Deir Ezzor, where they have come to within 19 kilometres (12 miles) of the provincial capital.
Syria’s conflict has killed more than 320,000 people and displaced millions since it started with anti-government demonstrations in 2011.
