Kenyan and Somali troops have pushed out al-Shabab fighters from the southern port city of Kismayo, the last bastion of the armed rebel group, the rebels have confirmed Al Jazeera reported.
"The military command of al-Shabab mujahedeen ordered a tactical retreat at midnight," Ali Mohamud Rage, a spokesman for the rebel group, said on Saturday.
Rage said, however, that the group would continue to fight for control of the town.
"Let them enter Kismayo, which will soon turn into a battlefield," he said.
Fighting for the city began after an amphibious assault led by the Kenyan military that began overnight on Thursday and raged through Friday.
Earlier, al-Shabab and some local clerics had called for residents to head towards the frontlines to defend the city.
Tension was high overnight on Friday, and residents said that supplies were running low and shelling had forced many to remain in their homes.
Colonel Cyrus Oguna, a Kenyan military spokesman, said Kenyan soldiers and Somali government troops had advanced on Kismayo from the north, south and from the sea.
Residents reported fighting near the beach earlier on Friday, about four kilometres outside the city, as military helicopters hovered overhead.
Many streets were deserted. Some masked men looked on from windows and balconies.
Rukia Jelle, a mother of five, said she could hear "deafening shells" and jets flying overhead when the fighting was occurring. Residents said Kenyan and Somali troops had advanced to a university campus just to the north of Kismayo and shells had rained down on the presidential palace, an al-Shabab base.
'Join the jihad'
Al-Shabab, which was driven out of the capital Mogadishu last August and is fighting African Union forces in other parts of the country, had earlier said that it would not surrender Kismayo.
"Going into Kismayo is not a piece of cake. For us, this is just the beginning, our troops are spread everywhere," Sheikh
Abdulaziz Abu Musab, the group's spokesman for military operations, told the Reuters news agency on Friday.
Radio Andalus, the group's radio station, was still airing live in Kismayo on Friday night, urging residents to take their guns and join the "jihad".
The radio also reported al-Shabab fighters had destroyed "enemy vehicles and chased away planes".
Residents said that local clerics were urging them to join the group in its fight to hold the city, and that some had done so.
Oguna said guns had been placed beforehand at a jetty and warehouse in Kismayo and that Somali national army troops participated in the assault.
He said the assault was part of a four-pronged attack involving Kenyan forces currently in villages outside Kismayo. The amphibious assault landed overnight on Thursday, he said, with some of the troops equipped with night-vision goggles.
In the past four weeks, fearing an assault by the Kenyans, an estimated 12,000 people have fled the city, whose total population is estimated at between 160,000 and 190,000.
Speaking on the sidelines of the UN General Assembly in New York, Musalia Mudavadi, the deputy Kenyan prime minister, called the entry of Kenyan forces into the Somali port "a significant victory".
"This is a major blow to them and we think it's positive for the region and for Somalia," he said.
Al Jazeera's Mohammed Adow described Kismayo as a very important and strategic town for the group.
Kismayo, "is the backbone of the funding of al-Shabab"; it is also the location from which the group bring in their arms and supplies, he said.
Losing Kismayo, said Adow, would be "a huge setback for" the group and would leave them with the Somali capital as the only place that can provide al-Shabab with a hideout where they will also have access to "soft targets".
Along with forces from Uganda, Burundi and Djibouti, Kenyan troops have been battling the group, which is said to have links to al-Qaeda, as part of an African Union peacekeeping force mandated with wiping out the figthers from their strongholds.
Kenya sent its troops into Somalia last October after the fighters were blamed for a series of raids on Kenyan soil
targeting its security forces as well as Western tourists.
Somalia has made progress in the past year in battling the group, who have wanted to impose their interpretation of Sharia law across the country since taking control of large swathes of south-central Somalia from 2007.
Elsewhere in Somalia, a journalist was killed in Mogadishu on Thursday night.
The death of Ahmed Abdulahi Fanah, of the Somali SAPA news agency, is the fifth such instance this week. So far in 2012, 15 journalists have been killed in the Horn of Africa nation.