The militants said on Monday that they had captured the warlord's headquarters in the south of the city and that his fighters had begun handing over their weapons.
The militants had claimed on Sunday that they had taken full control of the city after declaring victory over Qeydiid and fellow warlord and transitional government member Hussein Aidid, but heavy fighting had resumed early afternoon on Monday.
After four months of fighting between militants and the US-backed warlords, which left over 400 dead, Mogadishu fell on June 5 to the militants, who also control swathes of southern Somalia.
Somalia's transitional government in Baidoa, about 250kms (150miles) from Mogadishu, demanded that the Islamists abandon territories they seized in Mogadishu and be excluded from peace talks with the government, expected to resume in Khartoum on Saturday.
But Sheikh Sharif Sheikh Ahmed, a top official in Somalia's supreme Islamic Court, said that "the government has nothing to do with peace in Mogadishu".
Sheikh Ahmed says the government
has nothing to do with peace
"This government was unable to come to the capital after being repelled by the warlords, whom we have at last toppled. They (the government) should be grateful for what we did," he told journalists.
Earlier on Monday in Nairobi, Mwai Kibaki, the Kenyan President and Yoweri Museveni, his Ugandan counterpart, who are members of the seven-nation east African Inter-Governmental Authority on Development (IGAD), called on the international community to help deploy peacekeepers in the east African country.
In recent weeks, IGAD officials have complained that the international community, especially Western powers, have been non-committal on the Somali conflict, thus complicating regional efforts to restore a functional government there.