The counterattack began from the west of a riverside pocket in the Syrian village of Baghouz where the Islamic State group has been making its last stand, said a commander with the U.S-backed Syrian Democratic Forces, or SDF.
Clashes were underway as the Kurdish-led forces tried to repel the IS attack, he said, adding they were also fighting to secure an area taken late on Tuesday. Another commander said at least four SDF fighters were killed in the fighting since early in the morning. Both commanders spoke on condition of anonymity because they were not authorized to talk to the media.
A third commander, Dilbrin Nargiz, said the IS counterattack began just before dawn. IS militants usually operate in daylight as they lack night vision weapons and goggles.
The weeks-old push on Baghouz has also taken a toll on the Kurdish forces, some of whom have been battling IS for the past six years.
"We'll die long before this war is over," said Simone Awad, a 22-year-old fighter whose friend was shot in the head next to him in the fighting earlier in the morning. It was not clear if the friend, who was taken to hospital, survived.
The battle to retake Baghouz and surrounding villages began in September and has since driven the militants into the tiny sliver of land following intense fighting and major setbacks.
For the last few weeks, the militants remained holed up in the shrinking space along the eastern banks of the Euphrates River. Since early February, more than 10,000 civilians were evacuated from the IS-held pocket, most of them family members of IS fighters.
The U.S.-led coalition tweeted Wednesday it was continuing strikes against IS positions "day and night," allowing the militants no freedom of movement.
"Combined with the SDF ground movement, the final push in (Baghouz) continues," the coalition said.
A spokesman for the U.S.-backed forces, Adnan Afrin, said IS militants were putting up a "fierce resistance," firing mortar shells and rocket-propelled grenades in clashes that began Tuesday.
Afrin said his forces are advancing slowly, taking some positions on the edge of a tent encampment where thousands of civilians and militants had been holed up in recent weeks.
"In this small area, for you to make a large advance, you will have to have a lot of casualties," Afrin told The Associated Press late Tuesday. "So, to preserve the lives of our fighters and to complete this battle while minimizing losses, we are slowing down our advance for the safety and security of our forces."
Even as IS's self-proclaimed caliphate crumbled and the militants' territory shrunk, facing a relentless military campaign and hunger, many die-hard IS supporters said they still believe in the extremists' vision of an Islamic land.
In an audio recording and video released online Tuesday by militants said to be inside the village of Baghouz, IS attempted to enshrine an image for the future after defeat, depicting its crumbling domain as the one place ruled by "God's law" and promising it would one day be victorious.
One unidentified IS militant called on Muslim "brothers, in Europe and in the whole world" to "rise against the Crusaders and ... take revenge for your religion."