Pakistani forces have clashed with Taliban fighters after entering the main city in the Taliban-controlled Swat Valley, according to military sources.
At least 17 militants have been killed in street fighting in Mingora.
The push into the city is the latest phase of an offensive aimed at crushing the militants, whose influence extends across a wide area of the north-west.
The army has been fighting the Taliban in Swat and other areas since a peace deal broke down earlier this month.
"Street fights have begun," Athar Abbas, a general in the Pakistani army told reporters.
"It is a difficult operation. We have cleared some areas of the city."
Capturing the city is critical if the army is to regain control over the valley.
The army said they had destroyed most of the Taliban's ammunition dumps.
Abbas said Mingora had been surrounded and supply routes to the militants cut off.
Mingora residents say the Taliban are putting up fierce resistance and are still in control of the city.
Nearly 1.5 million people have been displaced by this month's fighting in the north-western region, and about two million since last August, according to the United Nations refugee agency.
On Friday, the UN appealed for $543m (€388m) in humanitarian aid to help those displaced by the conflict.
Pakistan's army began an offensive against the Taliban on 2 May after the peace deal broke down and the militants began expanding their area of influence.
A recent investigation suggested that less than half of Pakistan's North West Frontier Province (NWFP), which contains Swat Valley, and the neighbouring Federally Administered Tribal Areas is under full government control.
In Swat, the army says that about 15,000 members of the security forces are fighting between 4,000 and 5,000
It says more than 1,000 militants and more than 50 soldiers have been killed since the offensive began.