Nigeria's militant Islamists are in control of the key town of Damboa in north-eastern Nigeria, a local vigilante leader has told the BBC.
The vigilante force defending the town fled on Sunday, and Islamist group Boko Haram's black flag is now flying over Damboa, he said.
At least 40 people were killed when Boko Haram attacked Damboa on Friday, the vigilante leader added.
The group has been fighting since 2009 to create an Islamic state in Nigeria.
In April, it sparked international outrage by abducting more than 200 girls from their boarding school in Chibok, in Borno state, like Damboa.
The BBC's Chris Ewokor in the capital, Abuja, says when Boko Haram seized towns and villages in the past, it was driven out by the military.
However, government forces have failed to launch an offensive to recapture Damboa, he says.
It is one of the biggest towns in Borno state and a busy trading centre for people from neighbouring villages.
Meanwhile, a military helicopter flying in Borno state's Bama area crashed after developing a technical fault, the defence ministry says.
It did not give details on casualties.
During the fighting in Damboa, some electric installations were damaged and this has left the regional capital, Maiduguri, without electricity for the past three weeks, a local resident has told the BBC.
Damboa is about 85km (53 miles) from Maiduguri, the headquarters of Boko Haram before it was driven out by government forces last year.