Mali's army abandoned its military bases around the key northern garrison town of Gao on Saturday after a fierce assault by heavily armed rebels, military and civilian sources said.
It was the latest defeat for the army after a lightning 48-hour advance by northern rebels seeking to capitalise in chaos in the West African country after last week's coup.
Given the proximity of the camps to residential areas, our forces decided not to fight, a statement by junta leader Captain Amadou Sanogo read out on state television said.
One civilian source said rebels already occupied both main bases around the town while another source said just one of the two camps was now under rebel control. A Reuters reporter in Gao said there was no fighting in the town itself.
The army has hit the road to Bamako, said the civilian source of the road towards the capital some 1,000 km (600 miles) further south. A local government source reported dozens of army vehicles streaming out of the camps on the same road.
Gao, a town of some 90,000, is also being defended by well-armed local militia. However a military source said the army had told them to hide their weapons and not to put up a fight if the rebels entered.
The assault on Gao came a day after the rebels - a loose alliance of separatist nomad Tuaregs and local Islamists - seized Kidal, one of the three main towns of north Mali, along with Gao and the historic trading city of Timbuktu.
Junta leaders, whose neighbours have given them until Monday to hand back power to civilians or face sanctions including a crippling closure of Mali's borders to trade, pledged to come up with proposals very quickly to restore constitutional order.
We do not want to confiscate power, Colonel Moussa Sinko Coulibaly told reporters in Ouagadougou, the capital of Burkina Faso, after talks with Burkina President Blaise Compaore, named by West African grouping ECOWAS as main mediator in the crisis.
We will try to refine proposals to quickly reach an institutional solution acceptable to ECOWAS, the international community but also of course our national community, said Coulibaly, the head of cabinet for junta leader Amadou Sanogo.
Burkina Foreign Minister Djibril Bassolet told Reuters he was flying to Bamako on Saturday evening for discussions.
Earlier on Saturday, a Reuters reporter saw the rebels enter Gao early and hoist the flag of Azawad, the desert territory bigger than France that they want to make their homeland, before pulling back after meeting resistance.
Some rebels shouted God is Greatest in Arabic, suggesting loyalty to Islamist groups that are not separatist but want to impose sharia, Islamic law, on the mostly Muslim country.
The unrest in Mali, Africa's third largest gold producer, has been fuelled by weapons brought out of Libya during last year's conflict, and risks creating a vast new lawless zone in the Saharan desert that Islamists and criminals could exploit.
Mid-ranking officers behind last week's coup had accused the government of giving them inadequate resources to fight the rebels. But the coup backfired spectacularly, emboldening the rebels to take further ground.
Malian President Amadou Toumani Toure, whose decade in power was associated with stability but also rising frustration with a political elite accused of condoning widespread corruption, has said he is safe at an undisclosed location in Mali.
Coup leader Sanogo, who has won significant street support, pleaded on Friday for outside help to preserve the territorial unity of the cotton- and gold-producing former French colony.
Ivorian President Alassane Ouattara, the head of ECOWAS, told state television that a previously announced regional stand-by force of 2,000 could intervene against the rebels once civilians were back in power.
The West African army should come to the rescue of the Malian people ... Of course, that is tied to a return of constitutional order, he noted.
(Additional reporting by Adama Diarra and Emmanuel Braun in Bamako; Mark John and David Lewis in Dakar; Mathieu Bonkoungou in Ouagadougou; Ange Aboa in Abidjan and Pascal Fletcher in Johannesburg; Writing by Mark John; Editing by Tim Pearce)
(This story fixes spelling of last name in para 3)