Among the members of the Shaitat tribe killed were 100 fighters, but the rest were civilians, the Britain-based monitoring group said.
They were killed in the Ghranij, Abu Hamam and Kashkiyeh villages of the mainly IS-controlled province of Deir Ezzor, said the Observatory, which relies on a vast network of activists and medics on the ground for its information.
Observatory head Rami Abdel Rahman said that the fate of 1,800 other members of the tribe was unknown.
The clashes broke out after IS detained three members of the tribe, "violating an agreement", the monitor said.
Also Read
The IS has captured most of Deir Ezzor and declared it to be part of its "caliphate," along with large swathes of territory it has captured across the border in Iraq.
The Observatory said the Shaitat had vowed not to oppose the jihadist group's authority, in exchange for the IS not harassing or attacking its members.