Forces loyal to the the U.N.-backed Government of National Accord (GNA) in Tripoli, already in control of most of the city, liberated one of only three remaining districts under ISIS control on Tuesday, a security official told CNN Wednesday.
Col. Ismail Shukri, head of Intelligence for the Tripoli government in Misrata -- 167 miles (270km) to the north-west of Sirte -- told CNN their forces had captured a neighborhood from ISIS in Sirte designated "District 2," leaving only "Districts 1 and 3" under ISIS control.
"Now there is ongoing fighting in one part of District 1. Districts 1 and 3 are both residential areas adjacent to each other and we will soon advance on them," he said.
"There are about 150 to 200 terrorists still in these districts," he added. "There is no room for them to escape. They will fight until the last bullet. They had an opportunity to escape earlier but now they are surrounded."
Libyan forces started the campaign to liberate the Mediterranean city -- best known as Moammar Gadhafi's hometown before it fell into the hands of ISIS -- three months ago.
He added that the operation has air support from the US-led coalition.
The operation has not been easy, however, with Libyan forces encountering fierce resistance, including numerous suicide car bombs.
The extremist group gained a foothold in the country in a power vacuum that hasn't been filled since collapse of Gadhafi's regime collapsed in 2011.
Following the Arab Spring, there were hopes that Libya would follow a more democratic path like its neighbor, Tunisia. But warring factions soon split over how to run the country, and civil war ensued.
Two rival sides claimed to be the rightful leaders before signing a U.N.-backed peace deal in December.
US officials estimate there are 4,000 to 6,000 ISIS militants in the country.