Rebel forces control the northern Malian town of Kidal after pushing back government troops in heavy fighting.
Government spokesman Mahamane Baby says that after several hours of combat Wednesday, Malian army forces were "weakened by problems of coordination and intelligence" and had to "retreat under fire."
He said rebels in Kidal were receiving support from "drug traffickers" and fighters with al-Qaida in the Islamic Maghreb (AQIM).
Witnesses tell VOA they saw flags of two Islamist groups -- MUJAO and Ansar Dine -- flying among the rebel fighters Wednesday.
The Malian army had launched an offensive to retake the local governor's office from Tuareg separatists who are members of the National Movement for the Liberation of Azawad (MNLA).
Kidal has been a stronghold for the MNLA, which has fought for an independent state in northern Mali.
The government spokesman said the Malian army is "reorganizing." He also said the government remains "inflexible" on the need to establish state sovereignty throughout all of Mali.
In 2012, a Tuareg rebellion touched off a coup in the Malian capital, Bamako.
The ensuing unrest lead to an Islamist militant take-over in the country's north that prompted French and African forces to intervene.
The government and rebels agreed to a cease-fire last June, but the unrest has continued.