The last port in southern Somalia outside the control of the Islamic Courts (UIC) movement has fallen to the militants without a shot being fired.
Fighters seized control of the capital Mogadishu in June
Defence Minister Barre Hiraale and hundreds of his militia withdrew in 40 lorries as the Islamists approached.
UIC leader Sheikh Sharif Ahmed told the BBC Somali service that he had men both inside and around Kismayo.
Thousands of people are reported to have fled the city in recent days but others are celebrating on the streets.
Kismayo journalist Nasteh Dahir told the BBC's Network Africa programme that thousands of people had gathered in the town, chanting "God is great" to welcome the UIC fighters.
He said they had taken control of the whole city - the airport, the sea port and the building where Kismayo's former ruler, Mr Hiraale, had been based.
Witnesses told AFP news agency they had seen more than 600 Islamist gunmen on about 50 "battlewagons" - machine-gun mounted pick-ups also known as "technicals" - heading toward Kismayo on Sunday
The UIC had said it would occupy Kismayo to stop a foreign peacekeeping force using it as a bridgehead.
Earlier this month, the African Union agreed to a request by Somalia's transitional government, which controls only a small part of the country, to send in a regional peacekeeping force.
The UIC has steadily increased its hold on Somalia since its fighters took control of the capital, Mogadishu, in June, taking control of hundreds of square kilometres of territory while hardly firing a shot.
The country's transitional government is confined to a single town, Baidoa, and its president was the victim of a recent assassination attempt.
However, it remains recognised internationally as the sovereign authority of Somalia, which has not had an effective national government for 15 years.
The local militia in Kismayo was led by Mr Hiraale of the Juba Valley Alliance.
Government spokesman Abdirahman Dinari was quoted by Reuters news agency as saying any attack on Kismayo would breach a ceasefire deal between the administration and the Islamists agreed during recent talks in the Sudanese capital, Khartoum.
"We're requesting that the international community pressurise the UIC to stop attacking," he said.
The talks were due to resume later this month.
BBC Africa analyst David Bamford says the UIC insists it is a force for unity and stability in Somalia after years of division under the warlords.
But he adds that in recent weeks, its case has been severely tested as Islamist militants within their ranks have closed down cinemas and prevented Somali women working for non-governmental organisations.
The killings of a Western journalist and an elderly Italian nun have also raised concern.
Are you in Kismayo or are you one those who left the port recently? Do you know anyone in the area who is affected?
I spoke my father in Kismayo, he told me UIC came this morning and everybody happy. Since 1991 we have been living fearful and panic because of warlords and tribalism. Now anxiety has gone and everybody enjoying. He said we are expecting law and order, and unity and prosperity like Mogadisho.
I have been talking to friends and they told me not many people left Kismayo for fear. In fact many people are welcoming them so that law and order can restored.
abdirashid, Rosemount, USA
My name is Mohamed and I live in Kismayo, Somalia. I am very happy that the UIC are coming because they will bring us freedom and security which Allah gives us in great amounts. Everyone is celebrating in Kismayo now about the great news. We are tired of them warlords who were controlling Somalia in falsehood but now here is the UIC bringing freedom.
My cousin and his family lived in Kismayo for many years. He called me by phone yesterday because everyone was leaving the city in fear of the UIC warlords. The UIC control Mogadishu by force and by terror not by freedom. He said people just want freedom not extremism and fearful life and wish for international help. Most of my friends in Kismayo have already left for Kenya or Baidoa. I was advising my cousin to come to Puntland as soon as possible but it was too late for them. He could not make decision faster, he is paying for it.
Mahdi, Puntland, Somalia
I live in Kismayo, there has been panic that there will be a war in the town, but fortunately there has not been a war, and all people are excited that the UIC are coming and bringing law and order after long time of rule by the different warlords
Abdi Dahir, Kismayo, Somalia
The Union of Islamic Courts (UIC) are by the people of Somalia and for the people, they enjoy most of the Somali people's support, after years of warlordism, divisionism, and greedy thugs. UIC army and its leaders are working voluntarily day and night to return the dignity of all Somali people. They are indeed a uniting force since, we, Somalis, are tired of tribalism which is rooted in ignorance and intolerance towards your Somali brothers and sisters
Hassan, Kismayo, Somalia