Witnesses said a French attack helicopter destroyed the central police station in Gao in a pre-dawn assault on Monday.
A day earlier, rebels from the Movement for Oneness and Jihad in West Africa (Mujao) had hidden in the building before opening fire on Malian troops, sparking a long, street battle.
Hundreds of curious locals gathered on Monday morning to view the wreckage of the police station, where body parts and unexploded grenades lay amid the debris.
Soldiers eventually closed off the area so a French demining team could get to work, also evacuating the city's main market nearby.
"We fear an attack," a senior Malian officer explained.
One witness to the helicopter attack said an Islamist fighter inside the police station had blown himself up. Later that day, blood splatters and flesh still covered the concrete.
"It's disgusting but wonderful to see," said Mahamane Tandina (24). "These people tortured us, they did nothing but damage here."
During the 10 months the extremists occupied northern Mali, Mujao used the police station as the headquarters of its "Islamic police", enforcing a strict form of sharia that included public whippings and amputations.
Mujao has claimed Sunday's attack and a pair of suicide bombings on Friday and Saturday, the opening shots of a deepening insurgency in the former French colony.
Sunday's street fighting was the first large-scale urban guerrilla assault on territory reclaimed by French-led forces.
Medical and military sources said at least two Islamist rebels and three civilians were killed and 17 people wounded, including two Malian soldiers, in Sunday's battle.
France launched its operation on January 11, after Mali's interim government requested help. It sent in fighter jets, attack helicopters and ground troops to battle Islamist rebels who had seized the north and were advancing into southern territory.
The campaign racked up a string of early successes as French and African troops drove the extremists from Gao, Timbuktu and the rest of the towns under their control.
But the turn to suicide attacks, landmine explosions and guerrilla fighting show the security problems still facing Mali – and by extension France, which is eager to wind down the operation and hand over to a United Nations peacekeeping mission.
Mali not 'an overnight operation'
Paris announced last week it would begin bringing its troops home in March.
"The greater part of Malian territory has been freed, no town is occupied by a terrorist group and no networks or groups who had up until now threatened the lives of Malians are capable of launching a real offensive," Hollande said.
But at the same Paris news conference, Nigerian President Goodluck Jonathan warned that the west African force slowly being deployed in Mali would likely have to stay for some time.
"The rebels will come back as terrorists using guerrilla tactics," Jonathan said. "It's not going to be an overnight operation."
Nigeria's General Shehu Abdulkadir is leading the west African force, which will eventually include some 6 000 troops. Chad has pledged an additional 2 000 troops, most of them already deployed.
Hesitation from Mali
France wants the African force incorporated into a UN peacekeeping mission.
But Deputy secretary general Jan Eliasson said on Monday "there is still hesitation from the government of Mali".
He added that the situation on the ground would first have to be more stable and any UN peacekeeping force there would require a UN resolution.
US President Barack Obama on Monday allocated up to $50-million for ongoing US airlift and air refuelling services to France and Chad, for "efforts to secure Mali from terrorists and violent extremists".
Mali imploded after a March 22 coup by soldiers who blamed the government for the army's humiliation at the hands of north African Tuareg rebels, who have long complained of being marginalised by Bamako.
With the capital in disarray, Al-Qaeda-linked fighters hijacked the Tuareg rebellion and took control of the north. – AFP