"After ten days of evacuating more than 20,000 civilians... the battle was launched tonight" to wipe out the last remnants of the organisation, it 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".
President Trump's decision to pull USA troops out of Syria has triggered a scramble among worldwide powers and local forces to figure out how to fill the potentially destabilizing vacuum the Americans will leave behind.
Bali said there could be up to 600 IS fighters still inside the pocket, majority foreigners. But after almost two weeks of waiting "patiently", they are now due to begin their offensive on the final ISIS territory - which comprises of just two villages near the Iraqi border.
USA officials have said in recent weeks that Isis has lost 99.5% of its territory and is holding on to fewer than 5 square kilometres in Syria, or less than 2 square miles, where the bulk of the fighters are concentrated.
SDF spokesman Mustafa Bali told AFP that "the battle has started", following the week-long pause in fighting.
At its height, the jihadist proto-state proclaimed by IS in June 2014 straddled swathes of land in Syria and Iraq and was roughly the size of Britain.
"There is of course a safe corridor and civilians are coming out daily, and this reduces their number in Baghouz until we can be sure the town is free of civilians".
Four years ago, the militants controlled territory the size of Britain and millions of people, but Major General Christopher Ghika, the deputy commander of the USA coalition fighting the group, on Thursday said that "now less than one percent of the original caliphate" remains.
Major General Christopher Ghika, the coalition's deputy commander, described the size of the last IS pocket as "now less than one percent of the original caliphate".
At least 48 suspected ISIS members were among them, according to the Syrian Observatory for Human Rights.
The U.S. -led coalition has said it is not discussing the timeline of the U.S. withdrawal from Syria.
The Kurds, who have de facto autonomy in northeastern Syria, are also engaged in behind-the-scenes diplomatic talks over the fate of the region.
The SDF, which includes the Kurdish People's Protection Units (YPG), backed by Americans, has been a bone of contention in Washington's ties with Ankara. (AP) The US military is reportedly planning to withdraw all US forces from Syria towards the end of April.