Town of Gao was previously a stronghold of Islamist fighters after it was seized by an alliance of Tuareg rebels and Islamists last April.
French-led troops moved into Gao itself after earlier securing the airport and a strategic bridge to the south.
French officials said troops from neighboring Niger and Chad would now move into the town to help secure it.
They also suggested that government control was already being restored, with the mayor of Gao’s returning on Saturday after being ousted by the Islamist takeover.
There was no official death toll from the offensive, but the French army said “dozens” of Islamist fighters were killed in the overnight operations, without any casualties on the French and Malian side.
After a punishing series of air strikes on jihadist positions in Gao, Malian and French forces took first the airport and then the bridge over the river Niger, before being able to confirm they had taken control of the whole of the town.
Malian officials spoke of scenes of joy on the streets of Gao, but also of some looting.
Gao’s mayor, who has been in the capital Bamako since the town fell to the Islamists early last year, has been flown back in.
Chadian and Nigerian forces, meanwhile, are poised to pushed up from the Nigerien border – about 200 km to the south – in order to reinforce the French and Malians.
French-led troops are also reported to be advancing on the town of Lere to the west.
It all appears to confirm a picture of rolling successes for the French and Malians, as they retake the main population centres of the north, says the BBC’s Hugh Schofield in Paris.
The fall of Gao, northern Mali’s most populous town, marks a significant advance for French and Malian troops.
Islamists seized a vast area of northern Mali last year and have imposed strict Sharia, or Islamic law, on its inhabitants.
France intervened militarily on January 11 to stop them advancing further south.
It has already deployed 2,500 soldiers on the ground in Mali as well as launching air strikes.
With the capture of Gao, the French are increasingly confident of pushing the Islamists out of all the major population centres in the north, says our correspondent.
The other major northern towns of Kidal and Timbuktu remain in Islamist hands. But, French Prime Minister Jean-Marc Ayrault said the historic town of Timbuktu – an important symbol which has also been under Islamist control for most of the last year – should also soon be retaken.
The French are confident that this phase of the campaign will soon be over, adds our correspondent, though of course the vast desert hinterland offers the Islamists endless opportunities to retreat and regroup.
The UN refugee agency says more than 7,000 civilians have fled to neighboring countries since 10 January to escape the fighting.
In a statement earlier, Defence Minister Jean-Yves Le Drian confirmed that 3,700 French troops were engaged in Operation Serval, 2,500 of them on Malian soil.
Gao was one of the first rebel-held areas to be targeted by air-strikes after France decided to intervene in its former colony, a decision which took many by surprise.
A UN-backed international force had not been expected in the west African state until the autumn.
Several African countries have pledged military aid to help the Malian government win back control of the north.
On Friday the African Union asked the UN Security Council to authorize immediate logistical help to allow the 6,000-strong force to deploy quickly.
It also recommended civilian observers to monitor the human rights situation in the areas which have come back under the control of the Malian government. Human rights groups have accused the Malian army of committing serious abuses.
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