Rebels in Mali have captured the town of Kidal, just a week after the military seized power saying the army needed more equipment to fight the insurgents.
Kidal, which has 40,000 inhabitants, is by far the biggest town seized by the Tuareg rebels.
As the news was coming through, coup leader Capt Amadou Sanogo asked for foreign help to tackle the rebels.
The coup has been condemned - Mali's neighbours have threatened sanctions.
The regional body, the Economic Community of West African States (Ecowas), said it would close land borders, freeze Mali's assets and impose a financial blockade if the army did not stand aside before Monday.
They have also placed a peacekeeping force on standby.
Local residents have confirmed rebel claims to have seized Kidal, capital of the Kidal region, which stretches into the Sahara Desert.
Journalist Martin Vogl in the capital, Bamako, says it is a really serious setback for the government, as the town has a large military base.
He says that while the military had said it seized power to help fight off the rebels, in fact, since the takeover, military officers have been more concerned with the situation in Bamako, worrying about relations with the international community and forming a government, than the fighting in the north.
A fighter from the National Movement for the Liberation of Azawad (MNLA) told BBC Afrique: "[Kidal] is totally controlled [by us], there is no more resistance, all army positions have fallen."
Azawad is the Tuareg name for their home region in the Sahara Desert - Tuaregs have launched several rebellions over the years, complaining that the government based in far-off Bamako was ignoring them.
The army said it had withdrawn from the town.
"To preserve the life of the people of Kidal, the military command decided not to prolong the battle," said a statement from the junta, according to the Reuters news agency.
The latest insurgency was launched last year after Tuareg fighters returned from Libya where many had supported the late Libyan leader Muammar Gaddafi.
But the rebels have split into two factions, with some calling for the imposition of Sharia law.
Queues at banks
Capt Sanogo told journalists in Bamako that the situation was "critical" but did not mention Kidal directly.
"Our army needs the help of Mali's friends to save the civilian population and Mali's territorial integrity," he said.
He repeated promises to hold free elections but said nothing about leaving power, as demanded by Ecowas.
The president of the commission of Ecowas, Kadre Desire Ouedraogo, told reporters on Thursday that if the 72-hour deadline was not met, all the 15 countries of the bloc would deny Mali access to their ports, and there would be no transfers to commercial banks in Mali from the regional central bank, based in Senegal.
Mali is one of eight West African countries which use a common currency - the CFA franc.
A delegation of West African leaders met on Thursday in Ivory Coast, after earlier plans for talks with Mali's military leaders were abandoned as coup supporters occupied the airport's runway.
The BBC's John James in Ivory Coast says it is difficult to see how the regime in poor, landlocked Mali could cope if these sanctions were imposed.
He says the financial isolation of the government of then Ivory Coast President Laurent Gbagbo played a key role in weakening his grip on power last year - and he was in a far stronger position than coup leader Capt Sanogo.
There have been long queues of people waiting to withdraw money in Mali's banks all week. One bank will only allow people to withdraw the equivalent of about $1,000 each.
Martin Vogl says many Malians are upset that after 20 years of democracy, the army is once more in charge but there was also growing disillusionment with the ousted government and some feel Ecowas is pushing too hard.
The coup leaders have unveiled a new constitution as well as announcing elections in which those who took part in the coup would be barred from standing. However, no date has yet been set.
Under the new constitution, a transitional committee composed of 26 members of the security forces and 15 civilians would take power.
President Amadou Toumani Toure said on Wednesday that he remained in the country, free and in good health.