French troops have been fighting Mali's Islamist rebels in street battles in the town of Diabaly, Malian and French sources say.
In the first major ground operation in the conflict, French special forces were fighting alongside Malian troops.
Diabaly, 350km (220 miles) north of the capital Bamako, was captured by the rebels on Monday.
France intervened in Mali last Friday to try to halt the Islamists' push southwards towards the capital.
Islamists entered Diabaly on Monday, taking the town from Malian forces. French war planes have since attacked the rebel positions.
French army chief Edouard Guillaud said on Wednesday that ground operations had begun.
Defence Minister Jean-Yves Le Drian added: "Today, the ground forces are being deployed. Until now, we had made sure there were a few ground forces in Bamako to keep our people safe... Now French ground forces are heading up north."
A convoy of 50 armoured vehicles left Bamako overnight.
The BBC's Christian Fraser in Paris says these are legionnaires from the southern French town of Orange - a special forces unit expert in desert warfare.
Residents of Niono, 70km south of Diabaly, say the French arrived overnight.
A Malian security source told Agence France-Presse news agency that French special forces were fighting "hand-to-hand" with Islamists alongside Malian forces in Diabaly.
The French may face a difficult situation in the town.
One eyewitness, Ibrahim Komnotogo, told the Associated Press news agency: "The jihadists have split up. They don't move around in big groups. They are out in the streets, in fours and fives and sixes, and they are living inside the most inhabited neighbourhoods."
Adm Guillaud said France would do all it could to ensure civilians were not targeted. "When in doubt, we will not fire," he said.
Mr Le Drian has admitted that Malian forces around Diabaly have been struggling to combat the well-armed rebels.
He also said the central town of Konna had not been recaptured by government forces as had earlier been reported.
Our correspondent says the French or their allies in the Malian army need to take control of both Konna and Diabaly if their campaign is to advance.
French President Francois Hollande said France had been right to intervene.
"If the choice had not been made, it would no longer have been a question of 'when', because it would have been too late," he told journalists.
"Mali would have been conquered completely and the terrorists would be in a strong position today, not simply to submit the people of Mali to a regime they do not want, but equally to apply pressure to the countries of West Africa as a whole."
France has some 800 troops on the ground in Mali and defence sources said their numbers were expected to increase to 2,500.