Islamic State (IS) militants are reported to have entered the key Syria-Turkey border town of Kobane and are engaged in street-to-street fighting with Syrian Kurd defenders.
IS fighters entered eastern districts, raising their black flag on buildings and high ground.
Hundreds of civilians are reported to be fleeing to the Turkish border.
Taking Kobane, besieged for three weeks, would give IS control of a long stretch of the Syrian-Turkish border.
More than 160,000 Syrians, mainly Kurds, have fled the town.
Earlier a local official in Kobane, Idriss Nassan, told the BBC that the town would "certainly fall soon".
He confirmed IS was now in control of Mistenur, the strategic hill above the town and that there was heavy shelling. Kobane is now besieged on three sides.
'Sound of clashes'
The UK-based Syrian Observatory for Human Rights, which monitors the Syrian conflict, said Islamic State fighters had penetrated about 100 metres into Kobane.
It reported: "Urban guerrilla warfare has started and the fighting is taking place for the first time in districts at the eastern entrance, in Maqtala al-Jadida and Kani Arabane.
"The jihadists and the Kurds are clashing in the streets, between apartment buildings."
A translator in the town, Parwer Ali Mohamed, told Reuters news agency: "We can hear the sound of clashes on the street. More than 2,000 people, including women and children, are being evacuated. Turkish police are checking our luggage now."
The BBC's Paul Adams, near the border, says this has been a long day of constant gunfire, with smoke drifting across the rooftops of Kobane and occasional thunderous explosions reverberating across the valley.
He adds that the Kurdish defenders are saying that they relish the challenge, but this feels like the beginning of the end.
Our correspondent reported a steady stream of Turkish ambulances racing to and from the border, with many wounded people being treated in hospitals close to the frontier.
In other developments on Monday:
- At least 30 Kurdish fighters were killed in two attacks in the north-eastern Syrian city of Hassakeh, the Syrian Observatory for Human Rights monitoring group said
- The US Central Command confirmed a fresh air strike by US-led forces "destroyed two IS fighting positions south of Kobane"; there were two other air strikes in Syria and three in Iraq over Sunday and Monday, it said
- Nato Secretary-General Jens Stoltenberg vowed to protect Turkey, a member state, saying: "Turkey should know that Nato will be there if there is any spillover, any attacks on Turkey as a consequence of the violence we see in Syria"
- UK Foreign Secretary Philip Hammond met Iraqi Vice-President Ayad Allawi, vowing to use "all the instruments at our disposal" to defeat IS
Turkish Kurds and refugees have clashed with Turkish security forces on the border for the past two days.
They are angry at Turkey's perceived inaction over IS in recent months, as well as its refusal to allow them to cross into Syria to fight.
Last week, Turkey pledged to prevent Kobane from falling to the militants and its parliament authorised military operations against militants in Iraq and Syria.
But it appears to have taken no action so far to prevent the fighting.
Correspondents says Turkey is reluctant to lend support to the Kurdish forces in the town because they are allied to the PKK, banned as a terrorist organisation in Turkey.
Reproduced under licence from BBC News © 2014 BBC