Malian troops have surrounded the strategic central town of Douentza in a push to capture it from militant Islamists, an army spokesman has said.
Earlier, a military source said the town had fallen to government forces, but a resident denied this.
Militant Islamists seized control of northern Mali about nine months ago, after over-running government forces.
On Tuesday, African Union chairman Thomas Boni Yayi said Nato should send forces to Mali to fight the Islamists.
He said the Malian conflict was a global crisis which required Nato to intervene, in the way it had done in Afghanistan to fight the Taleban and al-Qaeda.
Nato troops should work alongside an African force in Mali, he said.
Some European leaders have voiced concerns that jihadists could use Mali's vast Islamist-controlled area, which is the size of France, to launch attacks on Europe.
Last month, the UN Security Council approved plans to send some 3,000 West African troops to fight the Malian Islamists.
But UN officials said they did not expect a deployment to take place until September 2013.
Col Diaran Kone, the army spokesman, told the BBC troops had surrounded Douentza, about 800km (500 miles) north-east of the capital Bamako, as part of an operation to capture the town from the Movement for Unity and Jihad in West Africa (Mujao).
A resident said Douentza was still under Mujao's control, and no fighting had so far taken place.
Government and Mujao forces have clashed near Konna town, which is on the edge of government-controlled territory and the regional capital, Mopti.
Residents in Konna told the AFP news agency that the two sides had been involved in heavy shooting.
"We are going to oust them," an unnamed Malian soldier is quoted by AFP as saying.
Mujao and another Islamist group, Ansar Dine, have controlled most of northern Mali since last April.
They formed an alliance with Tuareg rebels, over-running government forces in the northern regions of Timbuktu, Kidal and Gao.
But their alliance quickly collapsed, with the Islamists capturing the region's main urban centres and marginalising the Tuareg rebels.
The Islamists have been accused of war crimes and attempting to impose a strict version of Sharia, prompting fears the region could become a regional hub for al-Qaeda-linked militancy.
Islamist fighters in the historic city of Timbuktu have demolished several Sufi shrines and mosques - regarded as idolatrous by the hard-liners - raising international concern about the future of the Unesco world heritage site.
Burkina Faso is trying to mediate an end to the conflict.