Both local rebel groups and Al-Qaeda affiliate Al-Nusra Front claimed credit for the opposition advance.
Nawa is in Daraa province bordering Jordan, Damascus province and Quneitra, which has a boundary on the Israeli-occupied Golan Heights.
Fighting, regime shelling and a string of blasts in Daraa province on Sunday killed 19 people, among them a civilian, his wife and child, as well as two other children and a media activist, the Observatory said.
Six rebel and Islamist fighters were also killed, five of them when a mine exploded on the edges of Nawa.
The rebel and Al-Qaeda advance came a day after regime air raids on a town held by the jihadist Islamic State group in northeastern Syria killed 21 civilians and wounded 100, the Observatory said.
Syria’s military has increasingly resorted to using so-called barrel bombs, which rights groups have condemned as a particularly indiscriminate weapon that often kills civilians.
“Al-Nusra Front, Islamist rebel brigades and (moderate) rebel brigades took over the whole of Nawa town,” the Britain-based monitor said.
“Regime warplanes then carried out more air strikes targeting the town and its surroundings.”
Local rebel groups issued a statement claiming that “now Nawa has been completely liberated”.
Activists distributed amateur video showing rebel fighters shooting in the air, riding tanks and stamping on the Syrian flag that they consider to represent the regime they are fighting.
Al-Nusra Front also distributed via the Internet photographs showing their black and white flag raised over Nawa.
While not openly admitting that the army had withdrawn, state news agency SANA said troops were “redeploying and reorganising in the Nawa area… in order to prepare for upcoming fighting”.
The development comes days after deep rifts between the Al-Nusra Front and moderate rebels in the northwestern province of Idlib led to the jihadist group expelling its rivals from their positions.
Speaking to AFP via the Internet, an activist in the southern province of Daraa said: “In the north, there are ideological differences between the (rebel) Free Syrian Army and Al-Nusra Front.
“Here in Daraa, tribal ties run deep. There are no such rifts here,” Diaa al-Hariri said.
While suffering consecutive defeats at the hands of the army elsewhere in Syria, the rebels and Al-Qaeda have been steadily advancing in Daraa province.
Elsewhere in war-torn Syria, the Observatory said two rebel commanders and one from Al-Qaeda have been killed by unidentified gunmen in the northern province of Aleppo over the past three days.
In recent months, there has been a spate of murders of rebel leaders.
Syria’s conflict began in 2011 as a peaceful revolt against Assad, but morphed into a civil war that has killed some 195,000 people in less than four years.
Fighting began after Assad’s regime unleashed a brutal crackdown on dissent. More than half of the country’s people have been forced to flee their homes- AFP
