"The regime is launching counter-attacks to absorb the fierce rebel offensive ," said Observatory head Rami Abdel Rahman.
The Observatory said 50 rebels and allied militants had been killed since the assault began, as well as dozens of regime troops.
The Al-Watan daily, which is close to the government, reported on Wednesday that government forces "advanced again south and southwest of Aleppo because of the major setbacks" among rebel factions.
The Aleppo offensive groups fighters from Al-Qaeda’s former Syria affiliate, the powerful militant Ahrar al-Sham and other groups.
The anti-regime fighters are seeking to capture Ramussa, a district in Aleppo’s southwest suburbs, in a bid to cut off government forces and open a new route into the city for rebels.
Overnight, at least 10 civilians including four children were killed in rebel shelling of government-controlled districts on Aleppo’s southwestern edges, the Observatory said.
More than 40 civilians have been killed in opposition bombardment of those neighbourhoods since Sunday.