Islamic State group jihadists have recaptured almost all of Albu Kamal, putting up a fierce fightback for what had been the last significant Syrian town under their control, a monitor said Saturday.
Two Iraqi infantry divisions and Sunni tribal forces are carrying out the operation in Anbar province.
Iraqi forces seized several villages from ISIL, or the Islamic State of Iraq and the Levant group, on Saturday in an operation to retake Rawa, the operation's commander said.
Earlier in the day, Yarallah announced the launch of an operation to free the city of Rawa and the nearby town of Rumana within the first phase of a major offensive to clear the rural areas in the north of the Euphrates River.
Last week, Iraqi forces recaptured the larger town of al-Qaim, in what Prime Minister Haider al-Abadi called "record time", leaving just a few small pockets of land in Islamic State's hands.
The forces and their allies were still fighting ISIS in desert areas near Albu Kamal, the last town the militant group had held in Syria.
With the fall of Daesh's (ISIS) last significant stronghold in Syria, Iranian and Russian-backed Syrian troops now turn to face off with their main rival, the US -backed forces holding large oil fields and strategic territory in the country's north and east.
The recapture of the Rawa pocket would mark the final battleground defeat of Daesh in Iraq and sound the death knell of the sprawling "caliphate" the group declared in 2014 over a swathe of Iraq and Syria the size of Britain.
Meanwhile, Al-Bukamal, just across the Syrian border, reportedly fell back to IS on November 11, two Syrian opposition activists said.