Islamic State militants have occupied a besieged Palestinian refugee camp teeming with 18,000 civilians in the suburbs of Damascus. Chaotic clashes with the regime have left dozens dead amid the risk of a fresh humanitarian tragedy.

The jihadists attacked Yarmouk, in the eastern suburbs of the city, which contains about 3,500 children who have been cut off from supplies. The camp has been partly reduced to rubble by the vicious fighting in the three-year civil war.

It is the closest that Isis has reached to the heart of the Syrian regime and marks the latest in a series of setbacks for President Assad’s forces.

The Isis occupation has led to a chaotic three-way fight, with part of the camp still held by a variety of rebel groups and Syrian government forces launching missiles at the area.

Civilians in Yarmouk told The Times that they were trapped in their homes and that most of the camp had fallen to Isis, apart from the headquarters of the Palestinian rebel group Aknaf Bayt al-Maqdes.

“It’s a literal street battle now. People are stuck in their houses, it’s a complete curfew, and the humanitarian situation here is really critical,” said Omar Murad, a local Palestinian official. Civilians reported the involvement of multiple rebel groups in the fight to repel Isis.

“There’s dozens of casualties so far,” said an activist who can only be named as Rami. “The regime is just bombing, trying to kill whoever.”

Yarmouk has been under siege for more than two years and its beleaguered population is dependent entirely on UN aid convoys.

The arrival of Isis in the suburbs of Damascus comes at the end of a week that has brought a series of reverses for the regime, and there is a growing consensus among analysts that Syrian government forces are waning in strength.

Syrian rebel forces in the south of the country yesterday severed the last government road link to Jordan. The fall of Nasib, the border crossing, comes days after southern rebel forces celebrated the capture of Bosra al-Sham, an ancient town near the Jordanian border.

The rebels now control a buffer zone tens of miles deep along the Jordanian and Israeli borders. Last week rebels in the north of the country captured the city of Idlib.

“It’s indicative of a problem the regime has that has been increasingly obvious — it has a manpower shortage,” said Noah Bonsey, a Syria expert at the International Crisis Group. “It has constraints on how much ground it can gain and how much it can hold outside of its core areas.”