Islamic State group jihadists seized Syria's Palmyra on Thursday, as UNESCO warned that the destruction of the ancient city would be "an enormous loss to humanity".

The capture of Palmyra, a 2,000-year-old metropolis, reportedly leaves more than half of Syria under IS control and comes days after the group also expanded its control in Iraq.

But US President Barack Obama played down the developments, saying he didn't think the US was "losing" to IS.

Palmyra "is the birthplace of human civilisation. It belongs to the whole of humanity and I think everyone today should be worried about what is happening," UNESCO chief Irina Bokova said on Thursday.

IS fighters had spread out through Palmyra, including at the archaeological site in the city's southwest, the Syrian Observatory for Human Rights said.

The jihadists executed 17 people, including civilians, they accused of "working with the regime," it said.

Syrian state media said loyalist troops withdrew after "a large number of IS terrorists entered the city".

Online, IS proclaimed its capture of the entire city, strategically located at the crossroads of key highways leading west to Damascus and Homs, and east to Iraq.

The jihadists, notorious for demolishing archaeological treasures since declaring a "caliphate" last year straddling Iraq and Syria, fought their way into Palmyra on foot.

- 'A loss for all humanity' -

Known in Syria as "the pearl of the desert", Palmyra is home to colonnaded alleys, elaborately decorated tombs and ancient Greco-Roman ruins that attracted more than 150,000 tourists yearly.

IS sparked international outrage this year when it blew up the ancient Assyrian city of Nimrud and smashed artefacts in the Mosul museum, both in Iraq.

Syria's antiquities director now fears a similar fate awaits Palmyra, urging the international community to act to prevent the smuggling and destruction of its priceless artefacts.

Mamoun Abdulkarim described the capture of the site as "a loss for all of humanity, for world civilisation in the face of barbarism".

Analysts said the city also has strategic importance because of its location.

"IS now dominates central Syria, a crossroads of primary importance," said Fabrice Balanche, a French expert on Syria.

"Taking Palmyra opens the way to Damascus and Homs. Eventually, this axis can be threatened," he said.

IS has recently threatened a number of regime strongholds, including Deir Ezzor city in the east and military airports in the north and south.

"The capture of Palmyra leaves IS strongly placed to make more territorial gains from (Syrian President Bashar al-) Assad, at a time when the government is heavily occupied in the north and south," said Matthew Henman, head of IHS Jane's Terrorism and Insurgency Centre.

The jihadist victory also "reinforces IS's position as the single opposition group that controls the most territory in Syria," he said.

- IS 'controls half of Syria' -

By taking Palmyra, IS controls "more than 95,000 square kilometres (38,000 square miles) in Syria, which is 50 percent of the country's territory", the Observatory said.

IS dominates the provinces of Deir Ezzor and Raqa and has a strong presence in Hasakeh, Aleppo, Homs and Hama.

It has also seized most of Syria's oil and gas fields, using the income to fund the expansion of its self-styled "caliphate".

"IS controls large and contiguous territory with a lot of freedom of movement," said Charlie Winter, researcher on jihadism at the Quilliam Foundation.

But "even if it does control 50 percent of territory, it doesn't come near controlling 50 percent of the population", he told AFP.

Elsewhere in Syria on Thursday, at least 40 Islamist fighters were killed in a regime barrel bomb attack on the northern city of Aleppo, the Observatory said.

Palmyra's takeover came days after IS seized the Iraqi city of Ramadi, their most significant victory since mid-2014 when they conquered swathes of land, sparking a US-led air campaign to support Baghdad.

In an interview published Thursday, US President Obama described the loss of Iraqi territory as a tactical setback and blamed it on a lack of training and reinforcements of Iraq's own security forces.

"I don't think we're losing," Obama told news magazine The Atlantic.

"But it is indicative that the training of Iraqi security forces, the fortifications, the command-and-control systems are not happening fast enough in Anbar, in the Sunni parts of the country."

A US State Department official said Ramadi's loss would force Washington to take an "extremely hard look" at its strategy against IS, and that Washington was already stepping up aid to Iraqi forces.

Hollande says world must respond to threat to Palmyra
Riga (AFP) May 21, 2015 - French President Francois Hollande on Thursday said the world must respond to Islamic State jihadists' seizure of Palmyra amid fears they could destroy the Syrian city's world renowned ancient monuments.

"We have to act because there is a threat against these monuments which are part of humankind's inheritance and at the same time we must act against Daesh," Hollande said, referring to the Islamic State group by its Arabic name.

"It is really upsetting when a site of such riches which belongs to all of humanity falls into the hands of a terrorist group," he added, as he arrived at an EU-Eastern Partnership summit in the Latvian capital Riga.

UNESCO warned earlier that the destruction of the ancient city would be "an enormous loss to humanity".

The capture of Palmyra, a 2,000-year-old metropolis from the Roman era, reportedly means IS now controls more than half of Syria at a time when it is also expanding its territory in neighbouring Iraq.

There, IS sparked international outrage this year when it blew up the ancient Assyrian city of Nimrud and smashed artefacts in the Mosul museum.

The fear now is the extremists will do the same in Palmyra.