At the same time, supporters of the militias have protested against plans to deploy African peacekeepers in the lawless nation and an international forum has begun talks in New York.
Areas under the sway of the Joint Islamic Courts militia now include most of the capital, Mogadishu, the town of Jowhar in Middle Shabelle region as well as Gialalassi town and several posts in Hiraan region, all former strongholds of US-backed warlords.
Islamic commanders said they had seized the towns without much resistance and were targeting Beledweyne, a key access town to Ethiopia, about 300 kilometres north of the capital.
At the same time the Islamic alliance leadership sought the support of influential clan elders for the imposition of Sharia law in areas the Islamists now control and for the expulsion of the warlords from their last strongholds in the country.
Protesters oppose peacekeepers
Hundreds of supporters of the Joint Islamic Courts protested in Mogadishu against plans to deploy African peacekeepers to help the government impose its rule on the lawless nation.
The protesters poured scorn on the transitional parliament, which called for the peacekeepers, fearing an attack on Baidoa, about 250 kilometres northwest of Mogadishu, where it and the government have their temporary seats.
At the same time, around 200 people staged a separate demonstration in Baidoa in support of the peacekeeping force.
The Islamist militias have vowed to kill any foreign peacekeepers.
Key US talks
Norway is hosting an international meeting in New York to discuss the military successes in Somalia of an Islamic militia.
The UK, US, Norway, Sweden, Italy, Tanzania and representatives from the European Union are taking part in the Somalia Contact Group talks at Norway's UN mission.
The UN and African Union have been invited to observe but the Arab League and Kenya are unhappy at being excluded.
No-one from Somalia's transitional government was invited.
Kenya has played a crucial role in long-running Somali peace talks, which led to the formation of a fragile interim government in the town of Baidoa - based there because the capital, Mogadishu is too dangerous.
Talks “good step”
Mr Annan said the talks were a "good step forward".
But he added: "I don't think I would have recommended the United Nations or the Security Council supporting the warlords."
US Ambassador John Bolton said of Mr Annan's comments: "I certainly hope it is not an implicit criticism of American efforts to round up terrorists."
He cautioned against expecting major decisions from what he described as a mere "exchange of views" at the meeting.
US officials have refused to say if Washington had stopped financial backing of the warlord alliance.
The African Union's Peace and Security Council called for swift authorisation for the deployment of the regional peacekeeping force to Somalia, which was mooted in January 2005 but has not yet been formed.
Somalia has been without an effective central government since 1991, when dictator Mohamed Siad Barre was toppled from power.
Since clashes erupted in Mogadishu in February, nearly 350 people have been reported killed and more than 2,000 others wounded, many of them civilians.