"The battle will be launched this evening and its mission will be to eliminate the last remnants of the terrorist organisation", Mustafa Bali, the head of the SDF media office, said.
Earlier on Saturday, the Syriac Military Council, which fights under the SDF umbrella, announced they had sent an assault group for the "final operation/attack to defeat ISIS in Baghouz".
Bali did not say how long they expecte the battle to last.
Scores of Isis fighters are now besieged in two villages, or less than 1% of the self-styled caliphate that once sprawled across large parts of Syria and Iraq.
"There hasn't been any big advance or change on our side over the past five days", an SDF spokesman told AFP on Friday.
But it's not the full picture - IS still holds another sliver of territory in Syria further west - while its sleeper cells remain active. Turkey's plan envisages Ankara's control of the Manbij area and a 30-35-kilometre (18-22 mile) buffer zone in Syria along the Turkish border.
At the height of its rule, IS controlled territory the size of Britain.
Major General Christopher Ghika, the coalition's deputy commander, described the size of the last patch of land held by the jihadists as "now less than one percent of the original caliphate".
The Observatory said 12 IS gunmen attacked the SDF and clashed with them for several hours until most of the attackers were killed early Saturday.
The assault on Baghouz is being conducted by the SDF's Kurdish and Arab fighters, backed by US airstrikes and USA advisers.
The Britain-based war monitor has said that figure includes some 3,200 suspected jihadis.
The Kurds, who have de facto semi-autonomy in northeastern Syria, are also engaged in behind-the-scenes diplomatic talks over the fate of the region.
"Currently, ISIS is regenerating key functions and capabilities more quickly in Iraq than in Syria, but absent sustained [counterterrorism] pressure, ISIS could likely resurge in Syria within six to twelve months and regain limited territory", the report added, quoting officials with the U.S. Central Command.