Islamist rebels marched through Kona, a strategic village in the centre of crisis-hit Mali, after heavy clashes with Mali's army Thursday, residents said.
"Right now, they are in the process of walking in the city. They just broke through the entrance of the town hall as I speak to you," a resident in Kona told dpa over the phone.
The resident said he saw dead bodies of Malian government soldiers on the road.
A Malian army officer refrained from comment. He had earlier refuted rebel claims that Kona had been captured.
The fighting broke out late on Wednesday in Kona, about 680 kilometres north-east of the capital, Bamako. Kona lies on the frontier with rebel-held areas in the north.
Various armed groups, some reportedly linked to al-Qaeda, have been in control of about two-thirds of Mali since early last year, when they took advantage of a power vacuum created by a military coup in Bamako in March.
"The jihadists never lie. We control Kona," said Oumar Hamaha, a spokesman for the Movement for Unity and Jihad of West Africa (MUJWA) over the phone from Kona.
Hamaha said the rebels, whose alliance includes the MUJWA, Ansar Dine and al-Qaeda in the Islamic Maghreb group, lost three fighters in the battle. Many others were injured, he said.
The rebels had been sighted in the Kona area over the course of the last week and, on Tuesday, Mali's military acknowledged that Islamist rebels had attacked its frontline in the town.
"Fighting resumed this morning in Kona between armed forces and rebels," army spokesman Colonel Diarran Kone told dpa Thursday.
No death toll has yet been officially confirmed, but some reports said that the rebels had taken soldiers as hostages. The Defence Ministry denied such reports.
Hundreds of people protested on Thursday at Bamako's Freedom Square, calling for the departure of President Dioncounda Traore and for a plan to liberate the north.
The protest carried over from Wednesday, when hundreds of students blocked two of the three main bridges over the Niger river, effectively cutting the city into two.
Their action prompted authorities to close all educational institutions in Bamako until further notice.