Islamic State group fighters conducted a blistering counterattack on Albu Kamal in eastern Syria yesterday in a desperate bid to cling to the last urban bastion of their imploding "caliphate".

The jihadists punched back into the town they had lost a day earlier and swiftly retook several northern neighbourhoods, the Syrian Observatory for Human Rights monitor said.

"IS started counter-attacking on Thursday night and retook more than 40 percent of the town of Albu Kamal," Rami Abdel Rahman, head of the Britain-based Observatory, told AFP.

Syrian regime forces and allied fighters had retaken the town, which lies on the border with Iraq in the eastern Deir Ezzor province, from the jihadists on Thursday.

Albu Kamal was the last significant town to have been under full IS control and lies at the heart of what used to be the sprawling "caliphate" the group declared in 2014 over swathes of Iraq and Syria.

"The jihadists went back in and retook several neighbourhoods in the north, northeast and northwest," Abdel Rahman said. “ IS is trying to defend its last bastion."

The jihadist organisation has in the space of a few weeks seen its caliphate shrink to a small rump and lost major cities such as Mosul, Raqa and Deir Ezzor.