Rebels in pick-up trucks loaded with heavy arms entered the northern Mali town of Gao on Saturday, capitalising on the chaos caused by last week's military coup to make further gains.
The attack came a day after the rebels - a loose alliance of separatist nomad Tuaregs and local Islamists - seized the town of Kidal which, along with Gao and the historic trading city of Timbuktu, is one of three main regional centres of Mali's north.
"I saw them (the rebels) entering the town itself and putting up their Azawad flags," a Reuters reporter said, referring to the desert territory which is bigger than France that the rebels want to make their homeland.
"You can hear heavy weapons fire across the town," the reporter added, saying the rebels had set up base in a captured fire station on its outskirts, which later came under attack from army helicopters and heavy weapons.
Some rebel units were shouting "God is Great" in Arabic, he said, suggesting they were linked to Islamist groups who do not have separatist goals but instead want to impose shariah law on the mostly Muslim country.
The unrest in Africa's third largest gold-producer has been fuelled by weapons brought out of Libya during last year's conflict, and risks creating a vast new lawless zone in the Saharan desert that Islamist and criminal groups could exploit.
"LOOKING OVER THEIR SHOULDERS"
Mid-ranking officers behind last week's coup accused the government of giving them inadequate resources to fight the rebels. But the coup has turned into a spectacular own-goal, emboldening the rebels to take further ground.
Advances by the Tuareg-led rebels, who have joined forces with Islamist allies, are likely to increase Western concerns about growing insecurity in West Africa.
"If you have a successful Islamist revolt in northern Mali, people will sit up and take notice," John Campbell, the Ralph Bunche Senior Fellow for Africa Policy Studies at the New York-based Council on Foreign Relations, told Reuters this week.
Campbell, a former U.S. ambassador to Nigeria, said that one leader who might be "looking over their shoulders" at the rebellion would be Nigerian President Goodluck Jonathan, whose government is battling an insurgency by Islamist sect Boko Haram in the Muslim north of Africa's top oil producer.
Malian President Amadou Toumani Toure, whose decade-long rule was associated with stability and rising frustration with a political elite accused of turning a blind eye to widespread corruption, has said he is safe in an undisclosed location in Mali.
Coup leader Captain Amadou Sanogo, who has won significant street support for his putsch, pleaded on Friday for outside help to preserve the territorial integrity of the former French colony, which is a major cotton as well as gold producer.
Neighbouring countries have not answered his plea, however, and have given him until Monday to start handing back power to civilians or see the borders of his land-locked country sealed.
In a sign that moves are underway to negotiate an end to the chaos, three members of the new junta held talks in the Burkina Faso capital Ouagadougou with President Blaise Compaore, named by fellow West African leaders as the main mediator in the crisis.
If Mali's neighbours such as Ivory Coast and Senegal follow through with a threat to seal its borders, the impact on the economy will be felt almost immediately as the imported fuel on which it depends begins to run out.