The separatist rebels in Mali have moved into the historic town of Timbuktu after a rapid advance through the north of the country.
Eyewitnesses told BBC News by phone that rebels were mixing with local Arab militia who have been protecting businesses since troops fled.
The rebels bombarded a local army base but troops had already gone.
The leader of the coup that overthrew Mali's president last month has pledged to return power to civilian hands.
Capt Amadou Sanogo said in a statement in the capital, Bamako, that the 1992 constitution, which was scrapped by the coup leadership, would be re-established.
Analysts say the rebels in the north have been taking advantage of uncertainty after the coup to make a swift advance.
Two other important northern centres, Kidal and Gao, fell to the Tuareg fighters and their Islamist allies in recent days.
It appears there was no real combat in Timbuktu, the BBC's Thomas Fessy reports from Dakar in neighbouring Senegal.
Rebels from the National Movement for the Liberation of Azawad (MNLA) have been driving around the town in their pick-ups, waving the MNLA flag.
The army troops deserted their positions and the Malian Arab militia which remained to defend the town is now being seen with the MNLA.
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Located on the southern edge of the Sahara, and just north of the River Niger, Timbuktu is nearly 1,000 years old. Famous writers have contributed to its mythical status. The Moorish author, Leo Africanus, described how the king of Timbuktu was so rich that some of his golden objects weighed hundreds of kilos.
The town made its fortune through trade, where salt brought in from the Sahara was worth its weight in gold. Slaves and ivory were also traded.
With its distinctive mud mosques rising from the sand, the town is a centre for Islamic scholarship. About 700 ancient manuscripts are held in the town's approximately 60 libraries.
But the Timbuktu of today is very different from the golden age. It is poor and parts of it are sinking under the encroaching desert sands. It has until recently attracted tourists but they have been put off by a spate of kidnappings by a group with links to al-Qaeda.
Residents and other sources say they have talked and avoided a fight but it is unclear whether the Arabs have "joined" the rebel group or reached some other agreement, our correspondent says.
Timbuktu, about 706km (438 miles) from the capital Bamako, was the only major northern town still under the control of the Malian army.
Figures on casualties in the fighting have not been available.
'Prison opened'
Earlier, the MNLA, which is backed by Islamist fighters, said it "liberated" the town of Gao on Saturday.
Witnesses quoted by AFP said unknown attackers had forced open the gates of the town's prison and several public buildings had been looted by civilians.
The country has been in turmoil for more than a week since army officers overthrew the government, blaming it for failing to contain the rebels, who launched their offensive in January.
Capt Sanogo said earlier that soldiers had decided not to fight the rebels in Gao because the town's military camps were close to residential areas.
In his brief, new statement on Sunday, he said state institutions would also be "restored".
He said the coup leaders would consult with local political forces to set up a transition body "with the aim of organising peaceful, free, open and democratic elections in which we will not take part".
A spokesman for Ecowas, the regional group of states that has threatened sanctions if the Malian government is not reinstated, told BBC News a new consultation would be held within the group.
Ecowas, which has put 2,000 troops on standby for a possible intervention, threatened earlier to close land borders, freeze assets and impose a financial blockade if the army did not stand down before Monday.
The current chairman of Ecowas, Ivory Coast President Alassane Ouattara, said on Saturday Mali's territorial integrity must be preserved "at all costs".
Mali's overthrown President Amadou Toumani Toure is said to be currently safe at an undisclosed location inside Mali.
Residents of Bamako fear real shortages if the sanctions take effect, our correspondent says.
The fighting in the north has forced some 200,000 people from their homes, with neighbouring states struggling to look after refugees.
BBC
