Syrian rebel commanders say they have lost control of the strategic Salah al-Din district in the northern city of Aleppo after a government offensive.
The city has come under fresh bombardment, as the army attempts to recapture areas seized by rebels.
Iran called for dialogue between the government and opposition, at the start of a summit on the crisis in Tehran.
Meanwhile, Lebanese authorities have detained a former minister with close ties to Syria's President Assad.
Michel Samaha, who is known for his pro-Syrian views, was taken for questioning by the Lebanese Internal Security Forces over what were described as security reasons.
The Free Syrian Army (FSA) has confirmed it has retreated from Salah al-Din, a densely packed area of narrow streets on the south-west side of Aleppo, where rebel fighters had been heavily dug in.
State media had reported the army was in full control of the district, saying it had inflicted heavy losses on hundreds of "terrorist mercenaries".
"We have staged a tactical withdrawal from Salah al-Din," rebel commander Hossam Abu Mohammed of the Dara al-Shahbaa Brigade in Aleppo told the AFP news agency by phone.
"The district is completely empty of rebel fighters. Regime forces are now advancing into Salah al-Din."
Syrian Health Minister Wael al-Halqi sits at his office in Damascus, April 3, 2012 Wael al-Halqi, a Baath party loyalist from Deraa, was named as the new prime minister
The rebels still control several other districts, including some in the east of the city which activists say are coming under very heavy bombardment, according to the BBC's Jim Muir in neighbouring Lebanon.
State television reported clashes there too, in the Hananu quarter. It said dozens of rebels had been killed or wounded, while others had thrown down their weapons and fled.
On Wednesday, Syria's state military launched a large operation to retake Aleppo from rebel fighters, who overran some areas three weeks ago.
Aleppo is Syria's largest city, and Salah al-Din is considered a vital supply route for government troops coming from the south.
The Syrian Observatory said at least 26 people were killed in Aleppo on Wednesday - it said they were among 130 people killed across the country.
Meanwhile, three days after Prime Minister Riad Hijab defected to the opposition, the health minister Wael al-Halqi has been named as his replacement.
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The detention of a well-known Lebanese political figure has underlined the explosive potential of the Syrian crisis and how it stretches into the heart of Lebanese politics ”
image of Jim Muir Jim Muir BBC News, Beirut
Lebanese detention highlights Syria faultlines
Mr Halqi is a Baath Party loyalist from Deraa in the south of the country, where the uprising began in March last year, and where violence is still raging, our correspondent says.
Riad Hijab, whose defection was considered the most significant since the revolt began, was said to have crossed into Jordan on Wednesday.
Also on Thursday, Lebanese sources confirmed the detention of Assad ally Michel Samaha, who is being questioned over alleged plans to cause instability in Lebanon.
A senior official cited by AFP news agency said his arrest was connected to the discovery of explosives in northern Lebanon.
Mr Samaha was information minister for more than a decade, serving under the assassinated Prime Minister Rafiq Hariri.
Opening a 29-nation conference in Tehran, Iranian Foreign Minister Ali Akbar Salehi said dialogue between both sides was the only solution to crisis.
"The Islamic Republic of Iran firmly believes that the Syrian crisis can only be resolved through serious and inclusive talks between the government and opposition groups that enjoy popular support in Syria," Mr Salehi said in a speech broadcast on TV.
Western governments, which are not taking part, have expressed scepticism that Tehran can mediate, given its recent strong commitments to the survival of Syrian President Bashar al-Assad's government.
Iranian President Mahmoud Ahmadinejad, who is a staunch ally of the Assad regime, said the summit would be a gathering of countries with "a correct and realistic position" on the Syrian conflict.
Our correspondent says it is a meeting of people who are already close to Tehran and to the Syrian regime. Those sending representatives include Russia, China, Iraq, Pakistan, Jordan and India.
On Tuesday, Iranian security chief Saeed Jalili expressed strong support for President Assad during a visit to Damascus, describing Syria as a crucial part of a regional "axis of resistance".
Kuwait's foreign ministry told al-Seyassah newspaper it would not be sending a representative. Lebanon also said it would not attend while Moscow sent its ambassador and not its foreign minister.