The rebels already control two other dams on the Euphrates River, but Monday's capture of the al-Furat dam in the northeastern province of Raqqa was a coup for the opposition since it now controls water and electricity supplies to much of Syria, including government-held areas and large swathes of land the rebels captured during 22-months of conflict.
Rami Abdul-Rahman, a Britain-based anti-regime activist, said the rebels took control of the dam after successfully pushing out a group of Assad's loyalist from the facility's control room.
The dam fell to the rebel hands midday Monday. Most of the regime troops in the area had stopped fighting on Sunday following the fall of the nearby town of al-Thawra into opposition hands, Abdul-Rahman said.
The rebel push on the dam was led by al-Qaida-linked militant group Jabhat al-Nusra that has been fighting alongside the Syrian rebels in the conflict.
The government in Damascus did not confirm it has lost control of the al-Furat dam.
Earlier this month, the Observatory said the opposition fighters took control of another, smaller dam in Raqqa province, the Baath dam, named after Syria's ruling party. In November, Syrian opposition fighters captured a hydroelectric Tishrin Dam, near the town of Manbij in northern Aleppo province.
Syria's crisis began in March 2011 with largely peaceful protests inspired by the Arab Spring revolts elsewhere in the region that toppled longtime Arab dictators. It evolved into a civil war as the opposition took up arms to fight a government crackdown on dissent. More than 60,000 people have been killed in the violence, according to the United Nations.
The Assad family has ruled Syria for more than 40 years.