Residents said fighters from the Islamic Courts Group (ICG) drove into Hobyo at dawn to take control of the town.
A surrender was negotiated the previous evening with forces there loyal to the local commander, who had reportedly already left the area.
An ICG official in Mogadishu told Reuters news agency: “We have extended our reach to Hobyo. We did not capture it, but we reached the people of Hobyo to bring them our message of peace.”
Over the weekend, ICG fighters also took the port of Haradere, further south, from where bands of pirates had staged scores of attacks on commercial ships off the Somali coast.
Meanwhile on Tuesday there were reports that up to 150 soldiers in Somalia’s army had defected to the Islamist militia from their base in Baidoa, the provisional government’s seat north-west of Mogadishu.
The defections come as tensions have risen between the internationally backed but largely powerless government and the ICG, which is rapidly expanding its territory.
On Tuesday, proposed talks between both sides in Sudan, to be mediated by the Arab League, were delayed again after the Islamists renewed demands for the withdrawal of Ethiopian troops allegedly in Somalia to protect the government.
Both the Somali government and Ethiopia have denied that Ethiopian soldiers are in Somalia, despite numerous witness accounts of uniformed troops from Ethiopia deploying in and around Baidoa.
The recent crisis in Somalia began in May when bitter fighting started between the ICG and the country’s secular, US-backed commanders in Mogadishu, leaving hundreds dead.
The Islamist militias later succeeded in driving the commanders out of the city and much of southern Somalia.
Somalia has been without a functioning central authority since leader Mohamed Siad Barre was ousted in 1991, plunging the country into more than a decade of bloody civil war as local factions fought for power.