ALEPPO, Syria (AFP) - Syria's army took control of all of Aleppo's Old City Wednesday (Dec 7) as rebels retreated in the face of an offensive that has seen troops capture three-quarters of opposition territory.

At least 80,000 people have fled their homes in eastern neighbourhoods since forces loyal to President Bashar al-Assad began their blistering assault on the one-time rebel stronghold, a monitor said.

After three weeks of fighting, regime forces appeared closer than ever to retaking all of Aleppo and winning their most important victory yet in the civil war that began in 2011.

Diplomatic efforts to end the fighting have stalled despite widespread international concern, with Moscow and Washington trading accusations of blame.

The winding streets of Aleppo's Old City, a Unesco World Heritage Site famed for its medieval buildings and souk, had been divided between regime and rebel control since 2012.

But rebels retreated overnight from the last parts of the Old City they held, after the army seized the neighbouring districts of Bab al-Hadid and Aqyul, the Syrian Observatory for Human Rights said.

"Rebels were forced to withdraw from the Old City neighbourhoods of Aleppo for fear of being besieged," the Britain-based monitoring group said.

After seizing areas east of the Old City on Monday - including the large and strategic Shaar neighbourhood - the army and allied forces were in control of 75 per cent of the territory previously held by rebels in east Aleppo, the Observatory said.

The offensive showed no signs of slowing and overnight the army carried out heavy shelling of the Al-Zabdiya neighbourhood and other territory still under rebel control in the southeast of the city, the monitor said.

The assault has prompted a mass exodus of east Aleppo residents and the Observatory said Wednesday that at least 80,000 had now fled their homes.

It said the figure included residents who had sought refuge in the government-held west of the city and a Kurdish-controlled enclave, but not those who fled to remaining rebel territory.

President Bashar al-Assad's government has been urging civilians to leave east Aleppo for months and accused rebels of holding residents hostage for use as "human shields." As they moved into new areas, Syrian soldiers were helping residents to evacuate.

Inside one bus, evacuees could be seen huddling together, a baby wrapped in heavy blankets fast asleep at his mother's feet as she sat waiting for the vehicle to leave.

"The situation was very difficult," said Um Abdu, 30, as she left the Bab al-Hadid neighbourhood with her husband, five children, mother and siblings.

"We lived on edge for the last four days," she told AFP. "The gunmen were using us to protect themselves... but then the army came and we were able to leave."

World powers have struggled to find a way to halt the fighting.

US Secretary of State John Kerry said Tuesday he would work for peace talks to restart.

"We have been trying to find a way to get to the negotiating table... but Assad has never shown any willingness," Kerry said at a meeting of Nato foreign ministers in Brussels.

"Russia says Assad is ready to come to the table... and I am in favour of putting that to the test," he said.

Kerry, who has had repeated meetings on Syria with his Russian counterpart Sergei Lavrov, said they would meet again on Wednesday or Thursday in Hamburg, Germany.

Moscow is a key Assad ally and launched an air war in support of his forces last year, while Washington has supported rebel forces battling the regime.

Russia had announced talks with the United States in Geneva this week on organising a rebel withdrawal from Aleppo ahead of a ceasefire, but then Lavrov accused Washington of backtracking.

Kerry denied any change of plans and Washington itself accused Moscow of stalling after Russia and China blocked a UN Security Council resolution on Monday calling for a seven-day ceasefire.

Syria's government has said it will not agree to any ceasefire without a guarantee of a full rebel withdrawal from Aleppo, while key opposition factions have rejected any talk of leaving the city.

The offensive has killed at least 369 people in east Aleppo, including 45 children, the Observatory says.

Rebel fire into the government-held west of the city has killed at least 92 people, including 34 children, in the same period, it says.

Russia said Wednesday that an army colonel working as a military adviser in Syria had died several days after being wounded by rebel shelling in Aleppo.

"Ruslan Galitsky passed away in hospital as a result of his serious injuries. Russian army medics fought for several days to save his life," the defence ministry said in a statement carried by Russian news agencies.