Malian officials said they had taken back the strategic central town of Konna, which rebels had secured just a day earlier as they pushed south.
The news came hours after France announced it had begun military operations in support of Mali's army.
Armed groups, some linked to al-Qaeda, took control of northern Mali in April.
The Islamists have sought to enforce an extreme interpretation of Islamic law in the area.
Regional and western governments have expressed growing concern about the security threat from extremists and organised crime.
'Crushing retaliation'
Announcing France's military intervention, French President Francois Hollande said Islamists had been trying to turn Mali into a "terrorist" state.
He said the intervention complied with international law, and had been agreed with Malian interim President Dioncounda Traore. It would last "as long as necessary", he added.
French officials gave few operational details. When asked whether there had been French air strikes, Foreign Minister Laurent Fabius confirmed that there had been "an aerial operation".
Residents in Mopti, just south of Konna, told the BBC they had seen French troops helping Malian forces prepare for a counter-offensive against the Islamists.
Mr Traore declared a state of emergency across Mali, which he said would remain in place for an initial period of 10 days.
He used a televised address to call on Malians to unite and "free every inch" of the country.
"Our choice is peace... but they have forced war on us," he said. "We will carry out a crushing and massive retaliation against our enemies."
Late on Friday Malian officials said they gained control of Konna.
"Konna is under our control this evening but we are still conducting mopping-up operations," said Lt Col Diarra Kone, though he warned that some rebels might still be in the town.
The British government expressed its support for the French operation. US officials said Washington was considering providing intelligence and logistical support to French forces.
'Crusader intervention'
The west African bloc Ecowas said it was authorising the immediate deployment of troops to Mali "to help the Malian army defend its territorial integrity", AFP reported.
The UN had previously approved plans to send some 3,000 African troops to Mali to recapture the north if no political solution could be found, but that intervention was not expected to happen until September.
Mr Fabius said the aim of the operation was to stop Islamist militants advancing any further.
It was not clear how far the French would go in helping Mali's government retake territory in the north.
At least seven French hostages are currently being held in the region, and Mr Fabius said France would "do everything" to save them.
A spokesman for al-Qaeda in the Islamic Maghreb (AQIM) said he considered the French operation a "Crusader intervention", and told France it would be "would be digging the tombs of [its] sons" if the operation continued, according to the Mauritania-based Sahara Media website.
France ruled Mali as a colony until 1960.
from BBC
12 January 2013 Last updated at 01:04 GMT
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