Syrian government forces are retaking control of the rebel-held part of Deraa, the birthplace of the revolt against President Bashar al-Assad.
Troops, accompanied by Russian military police, entered the area and raised the national flag, state media reported.
Rebels there have reportedly agreed to surrender in return for an amnesty or safe passage to the rebel-held north.
The army has recaptured large swathes of Deraa's surrounding province since launching a major offensive on 19 June.
The United Nations says up to 234,000 people remain displaced by the fighting, 70% of whom have sought refuge in neighbouring Quneitra province, near the frontier with the Israeli-occupied Golan Heights.
Tens of thousands of other people who had been sheltering along the border with Jordan have returned to their homes since rebel fighters in the Deraa countryside agreed to lay down their weapons and accept state rule last Friday.
Why is the fall of rebel-held Deraa so significant?
The city has both strategic and symbolic importance. It is a provincial capital and is close to the main crossings on the Jordanian border. It is also where the Syrian uprising began in March 2011.
Pro-democracy protests erupted there after the arrest and torture of some teenagers who painted anti-government slogans on a school wall, inspired by the "Arab Spring" revolutions in neighbouring countries.
When the government used deadly force to crush the dissent, protests demanding President Assad's resignation erupted nationwide.
The unrest spread and the crackdown intensified. Opposition supporters took up arms, first to defend themselves and later to rid their areas of security forces.
The violence rapidly escalated and the country descended into a civil war that has left more than 350,000 people dead and displaced 11 million others.
What led to the rebels surrendering in Deraa?
South-western Syria had been relatively calm in the past year because of a "de-escalation" agreement brokered by the US and Jordan, which support the opposition, and Russia, a staunch ally of the government.
But Mr Assad set his sights on regaining full control of the region after defeating rebels in the Eastern Ghouta, outside the capital Damascus, in April.
Troops and allied militiamen, backed by Russian warplanes, advanced swiftly after launching an offensive just over three weeks ago.
Intense air, artillery and rocket strikes weakened the rebels, who were informed by the US that it would not intervene militarily on their behalf, and prompted more than 300,000 civilians to flee their homes and head towards Jordan and the Golan.
When the Jordanian and Israeli government refused to open their borders, the UN warned of a humanitarian crisis. It said living conditions at the makeshift camps for the displaced were dire, with many people lacking adequate shelter and regular access to clean drinking water and healthcare.
Dozens of rebel-held towns and villages agreed localised truces before the main rebel factions opened negotiations with Russian mediators on a wider deal.
Last week, after Russia guaranteed the safe return of displaced civilians and the evacuation to rebel-held territory in Idlib and Aleppo provinces of people who wanted to leave, rebels surrendered their heavy and medium weapons in the countryside east of Deraa city and the Jordanian border area.
On Thursday, rebels holed up in the south of Deraa city began discussions over their own handover with a Russian delegation, sources told Reuters news agency.
Is the fighting in the south over?
Pro-government and rebel forces have also been battling jihadist militants from an affiliate of the Islamic State group, which controls a sliver of territory adjoining the occupied Golan Heights and is not part of the ceasefire deal agreed with the rebels.
The Syrian Observatory for Human Rights, a UK-based monitoring group, reported on Thursday that members of the Khalid Ibn al-Walid Army had seized the rebel-held village of Hait overnight, despite Russian and government air strikes targeting their positions on Wednesday.
IS news outlets claimed that militants had also captured nearby Khirbat Yali.
Meanwhile, the Israeli military attacked three Syrian army posts near the Golan frontier on Thursday, hours after it intercepted a drone approaching from Syria.