At least 60 people were killed on Monday when Al-Qaeda militants raided a barracks, the latest in a spate of attacks by the extremist network which has boosted its presence in Yemen's lawless south and east.
Local officials said 40 of the dead after the clashes in the Abyan province city of Loder were militants, revising an earlier toll supplied by a military official of 24 militants killed.
A military source said the army lost 14 men, including an officer, while six other people were also killed in the violence.
The barracks in Loder came under fire from the Islamists before daylight and the soldiers fought back, military sources said.
A government official in Loder told AFP that the army later withdrew from the barracks where the town's tribesmen, who have been fighting alongside the soldiers, were left to battle the militants.
"The army is backing us with weapons," a tribal chief said. "We will fight Al-Qaeda and will not let them into our city."
Monday's attack came after air strikes killed 24 suspected Al-Qaeda militants in their strongholds of southern and eastern Yemen at the weekend, according to the defence ministry and a tribal chief.
The city of Loder is located some 150 kilometres (95 miles) northeast of Zinjibar, the Abyan provincial capital which the Partisans of Sharia (Islamic law) overran in May last year.
A tribal source said the militants have been hiding out in rugged mountainous regions east and north of Loder.
The Partisans of Sharia is linked to Al-Qaeda in the Arabian Peninsula, or AQAP, which the United States considers to be the most active branch of the global terror network.
AQAP has exploited a decline in central government control that accompanied Arab Spring-inspired protests that eventually forced Yemen's veteran president Ali Abdullah Saleh to cede power in the face of a popular uprising.
Al-Qaeda briefly overran Loder in August 2010 before being driven out by the army, according to a military source.
He said the militants were deployed in numbers around the city and wanted to retake it because of its strategic location between Shabwa, Bayda and Lahij provinces where AQAP is also active.
"The tribes are fighting alongside the army and we will repel Al-Qaeda. Their plans will fail so long as the local population stands by our side," the military source said.
A local source in Jaar, where dead and wounded extremists were taken, said that 12 militants were also killed late on Sunday in artillery shelling by the army on the outskirts of Zinjibar.
Dozens of fighters have poured in from the town of Azzan in Shabwa to back fighters in Zinjibar, he said. Among them were nationals from neighbouring Gulf states, mainly Saudi Arabia.
In Yemen's main southern city of Aden on Monday, a policeman was killed and another was wounded in an attack on their patrol, a police official told AFP.
A witness said the attack took place in Mansura, a residential district of Aden, where two suspected Al-Qaeda bombers died on Friday as their payload exploded short of their intended target, which was intelligence offices.