The fighters captured the town of Soran Azaz and two nearby villages after clashes with other rebels, the Observatory said.
This meant the group could now move along a road leading north to the Bab al-Salam border crossing between the Syrian province of Aleppo and the Turkish province of Kilis.
The next stop would be Syria’s Azaz city, 10 km (6 miles) further north, Islamic State a gateway to the border crossing close by, the Observatory added.
Islamic State has seized tracts of territory across Syria and Iraq. It had advanced rapidly in other parts of Syria in recent weeks, capturing the central city of Palmyra and the last border crossing between Syria and Iraq in the east.
The group is fighting both rival insurgents, the Syrian military and Kurdish forces in the four-year-old conflict.
Further east in Hasaka province, a fire in a clinic caused by a gas explosion killed at least 24 people including children in Qamishli city, the Observatory said.
Syrian air force strikes on Saturday in al-Shadadi town in the province had killed 43 Islamic State fighters and 22 civilians, it said.
Mainly Kurdish YPG forces have been battling Islamic State in Hasaka, a strategic province for all sides in the conflict due to its position next to Islamic State-held territory in Iraq.
U.S-led forces have carried out air strikes on Islamic State positions in the province and have worked in coordination with the Kurds. Both the U.S.-led forces and the YPG say they do not work with the Syrian military, which has also bombed the area.