South Sudanese troops have recaptured Bentiu, the capital of oil-producing northern Unity state, from fighters loyal to rebel leader Riek Machar.
The government said on Friday that the city, one of two rebel-held state capitals, was "now under our control", following days of fierce fighting that has forced tens of thousands to flee the area.
Army spokesman Philip Aguer said the city was retaken at 14:30 local time (1130 GMT).
"When you control Bentiu, you control all the oil fields in Unity state," Aguer added.
The army had earlier said it was sending thousands of additional troops to join government forces fighting to retake Bentiu and Bor, the capital of Jonglei state.
The rebel leader confirmed that his forces had lost control of Bentiu, but vowed to continue fighting against the government.
"We withdrew from Bentiu, but it was to avoid fighting in the streets and save civilian lives. We fight on, we will continue the battle," Machar said, adding that his side would continue peace talks that are taking place in neighboring Ethiopia.
Speaking in the Ethiopian capital Addis Ababa, a rebel military spokesman called the loss of Bentiu a "temporary setback".
"Our forces made a tactical withdrawal to avoid civilian casualties," Lul Ruai Koang said.
"The government does not have the capacity to defeat us militarily," he added.
The political crisis in South Sudan began after President Salva Kiir accused his former vice president Machar of attempting a coup. The fighting between troops loyal to Kiir, who is from the Dinka ethnic group, and opposition leader Machar, a Nuer, erupted around the capital Juba on December 15, 2013.
The International Crisis Group said on Thursday that about 10,000 people have been killed in the violence.
“Given the intensity of fighting in over 30 different locations in the past three weeks, we are looking at a death toll approaching 10,000,” said Casie Copeland, an analyst at the International Crisis Group.
On Wednesday, South Sudanese warring factions failed in their peace talks in Ethiopia following the government’s rejection of rebels’ calls to free prisoners accused of spearheading the alleged coup attempt.
Rebel sources said there will be no imminent truce in the country unless the government frees a group of jailed politicians.
But President Kiir has rejected the condition, saying the prisoners will be released after the case goes through the country's judicial system.
South Sudan gained independence in July 2011 after its people overwhelmingly voted in a referendum for a split from the North.
The government in Juba is grappling with rampant corruption, unrest and conflict in the deeply impoverished but oil-rich nation, left devastated by decades of war.
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