Syrian opposition fighters have taken control of a number of border crossings with Iraq.
It came after Syrian state television announced that regime forces had "cleaned" the al-Midan neighbourhood of "terrorists".
"Our brave army forces have completely cleaned the area of Midan in Damascus of the remaining mercenary terrorists and have reestablished security," the broadcaster said.
Damascus activist Khaled al-Shami, contacted via Skype, said rebels carried out a "tactical" retreat early on Friday to spare civilians further shelling after five days of intense clashes between opposition fighters and regime forces.
The Observatory, in an earlier statement, said "seven tanks and two armed personnel carriers stormed the district" of al-Midan, in southern Damascus.
Clashes were also reported in Kafr Souseh and Al-Hajar Al-Aswad on outskirts of Damascus between Syrian regime forces and rebel fighters.