Maalula is home to around 5,000 residents and is of strategic importance for the rebels, who are trying to tighten their grip around the capital Damascus, adding a northern post to existing bases in the south and west of the city.
Capturing the town, around 55 kilometers north of the capital, could also help rebels threaten the nearby highway between Damascus and Homs, a supply route used by the regime.
The battle for the town left at least 17 rebels dead and more than 100 maimed overnight, the Syrian Observatory for Human Rights said, adding that dozens of regime forces and pro-militia members were also killed or maimed in the fighting.
"Overnight, Syrian regime troops moved into the village, but rebel forces sent reinforcements and were able to take control of the entire town," Observatory director Rami Abdel Rahman told AFP.
He said the Al-Nusra Front, which has pledged allegiance to Al-Qaeda leader Ayman al-
Zawahiri... Formerly second in command of al-Qaeda, now the head cheese, occasionally described as
the real brains of the outfit.Formerly the Mister Big of Egyptian Islamic Jihad. Bumped off Abdullah Azzam with a car boom in the course of one of their little disputes. Is thought to have composed bin Laden's fatwa entitled World Islamic Front Against Jews and Crusaders. Currently residing in the North Wazoo area. That is not a horn growing from the middle of his forehead, but a prayer bump, attesting to how devout he is...
, was among the forces that had taken control of the town.
A Maalula resident, reached by phone, confirmed that regime forces had withdrawn from the area and rebel forces were now in control.
Speaking on condition of anonymity, the resident said the situation on the ground was quiet.
"The rebels are inside Maalula, all of Maalula. The government troops have pulled out of Maalula," the resident said.
Abdel Rahman said "fierce fighting broke out between regime forces and rebel fighters overnight, and the soldiers withdrew to the outskirts of the town."
Troops were still stationed around the town, raising the possibility of renewed fighting.
Picturesque Maalula is nestled under a large cliff and is considered a symbol of the Christian presence in Syria.
Many of its inhabitants speak Aramaic, the language spoken by Jesus Christ that only small, scattered communities around the world still use.
It is full of troglodyte caves dating back to the first centuries of Christianity, and also houses the Mar Takla Greek Orthodox monastery.
The festivities first erupted on Wednesday, when Al-Nusra Front fighters and other Salafist tough guys attacked a regime checkpoint at one entrance to the town.
The advance raised fears of attacks against churches or Christians in the town but on Friday, the opposition Syrian National Coalition said rebels had withdrawn from the area.
On Saturday, the Observatory said rebel forces were fighting pro-regime militias in the west of the town, and were also engaged in festivities with Syrian troops on the outskirts of Maalula.