The Kurdish-led Syrian Democratic Forces (SDF) fired on ISIS terrorists on February 8 ahead of a planned assault on the terrorists' last enclave on February 9 in the part of Syria where a USA -backed coalition has been supporting operations against the group.
Over the course of the last two years, the Islamic State has lost most of its territory in Syria and Iraq, resorting to hunkering in hideouts located in the remaining territories under its control.
After a pause of more than a week to allow civilians to flee, the SDF said Saturday it had resumed the fight to seize the last four-square-kilometre (one-square-mile) patch from the militants.
The US military is preparing to withdraw all of its troops from Syria by the end of April even as the Donald Trump administration is yet to come up with a plan to protect its Kurdish partners from attack when its forces pull out, the Wall Street Journal has reported.
Major General Christopher Ghika, the coalition's deputy commander, described the size of the last IS pocket as "now less than one percent of the original caliphate".
"This battle will be sealed in the coming days".
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The Observatory said 12 ISIS gunmen attacked the SDF and clashed with them for several hours until most of the attackers were killed early on Saturday.
At its height, the hardline proto-state proclaimed by ISIS in June 2014 straddled swathes of land in Syria and Iraq and was roughly the size of Britain.
Thousands of suspected ISIS fighters have attempted to blend in with civilians fleeing the militant group's battered last bastion, including a large number of foreigners. Some of these are the most battle-hardened, ruthless and experienced fighters remaining in ISIS.
The SDF, backed by air strikes carried out of the US-led coalition, has driven out IS from towns and villages in north-eastern Syria in recent months.
"Remnants - that's all they have, remnants - but remnants can be very unsafe", Mr Trump said.
The president's sudden decision surprised many in his own administration as well as coalition allies such as Turkey and an alliance of Kurdish and Arab militias that fought Islamic State with USA military support.
There are between 14,000 and 18,000 ISIS militants in Syria and in Iraq, including up to 3,000 foreign militants, according to a report by the sanctions monitoring team presented to the Security Council.