US-backed Syrian rebels were pushed back from the outskirts of an Islamic State-held town on the border with Iraq and a nearby air base on Wednesday after the jihadists mounted a counter- attack, two rebel sources said.
The New Syria Army rebel group had launched an operation on Tuesday aimed at capturing the town of Al-Bukamal from Islamic State.
One rebel source said Islamic State fighters had encircled the rebels in a surprise ambush. They had suffered heavy casualties and weapons had been seized by the jihadists, the source said.
"The news is not good. I can say our troops were trapped and suffered many casualties and several fighters were captured and even weapons were taken," he said.
A spokesman of the New Syria Army, Muzahem al Saloum, confirmed the group's fighters had retreated. "We have withdrawn to the outlying desert and the first stage of the campaign has ended," Saloum told Reuters.
Despite the retreat, Saloum said the fighters had at least succeeded in evicting Islamic State from large swathes of desert territory around the town.
Islamic State affiliated Amaq news agency had earlier said it had killed 40 rebel fighters and captured 15 more in a counter-attack at the Hamadan air base north west of the city.
The operation aiming to capture Al-Bukamal was meant to add to pressure on Islamic State as it faces a separate, US-backed offensive in northern Syria aimed at driving it away from the Turkish border.
The New Syria Army was formed some 18 months ago from insurgents driven from eastern Syria at the height of Islamic State's rapid expansion in 2014. Rebel sources say it has been trained with US support.
The Syrian Observatory for Human Rights said the group's offensive against Islamic State was being mounted with the backing of Western Special Forces and US-led air strikes.
Islamic State's capture in 2014 of Al-Bukamal, just a few kilometers (miles) from the Iraqi frontier, effectively erased the border between Syria and Iraq. Losing it would be a huge symbolic and strategic blow to the cross-border "caliphate" led by Abu Bakr al-Baghdadi.
The US-led campaign against Islamic State has moved up a gear this month, with an alliance of militias including the Kurdish YPG launching a major offensive against the militant group in the city of Manbij in northern Syria. In Iraq, the government this week declared victory over Islamic State in Falluja.
Syrian rebel sources say the rebel force has received military training in US-run camps in Jordan, but most of their training was now being conducted in a main base at al-Tanf, a Syrian town southwest of Al-Bukamal at the border with Iraq.
The New Syria Army's base in al-Tanf was hit twice earlier this month by Russian air strikes, even after the US military used emergency channels to ask Moscow to stop after the first strike, US officials say.