Forces loyal to Somalia's transitional government have captured a key town near the Kenyan and Ethiopian borders.
For the past two years Bulo Hawo has been mainly under the control of the Islamist al-Shabab militia.
Government troops, backed by forces from the African Union, also gained ground from the group in the country's capital, Mogadishu.
Reports say 50 peacekeepers were killed but the African Union's peacekeeping mission (Amisom) has not confirmed this.
Freedom of manoeuvre
Maj-Gen Nathan Mugisha of Amisom said his forces had captured the former ministry of defence building in the north of the capital, gaining control of a major al-Shabab base.
"By taking these positions we have effectively reduced their freedom of manoeuvre in that sector," Gen Mugisha told Reuters news agency.
He said the offensive meant the UN forces now had control of seven districts in the capital, leaving six contested and three under rebel control.
The offensive in the town of Bulo Hawo began early in the morning. Dozens of militants were reported to have been killed in the fighting which lasted more than three hours.
"We have chased them to an area 40km (25 miles) south of the city," Sharif Abdiwahid Sharif Aden, a spokesman for the pro-government militiamen told Associated Press.
Eyewitnesses said Ethiopian troops were also part of the offensive against al-Shabab.
Somalia has not had a functioning national government for 20 years.
Al-Shabab controls much of southern Somalia and has been fighting interim government forces and the 8,000 AU troops for control of Mogadishu in recent months.
The BBC's Will Ross, in Nairobi, says that it is clear the group has been under increased pressure on several fronts.
The question now, he says, is whether or not the al-Qaeda-linked fighters have sufficient power to reverse any of their recent losses.