IS kills 20 Kurdish-led fighters in Syria
The US-backed SDF is waging an offensive around the town of Hajin in the province of Deir az-Zour, the jihadist group's last stronghold in the country's east.
"The fighters were advancing during a sandstorm, they were surrounded, IS members used explosives and opened fire," said the Observatory.
The SDF had been closing in on the IS pocket for months before formally launching its offensive on Monday.
Since then, 53 jihadists and 37 SDF fighters have been killed in fierce clashes, according to the Britain-based Observatory.
The Islamic State group once held nearly all of Deir az-Zour, but separate offensives last year by the SDF and Russian-backed regime forces left the jihadists clinging to a small area of territory near the Iraqi border.
The SDF estimates IS has some 3,000 fighters in its besieged holdout, many of them foreigners.
The Islamic State group once held swathes of territory across Syria and Iraq but has since seen its self-declared "caliphate" collapse.
The jihadists now control less than three percent of Syria and are mostly present in the vast Badiya desert, which lies between Damascus and the Iraqi border.
The Kurds, who form the bulk of the SDF forces, played a key role in ousting IS from Syria and have refrained from any direct conflict with regime forces during the seven-year-long war.
Wary of the US as an unpredictable ally, Kurdish leaders opened talks with Damascus in July despite their desire for autonomy in a decentralised state. Most observers say the talks are an attempt to salvage what they can of the institutions they built over the years.
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