The fighting near the town of Lawder started over the weekend when al-Qaida attacked an army post, sparking resistance from Yemeni troops and from armed residents.
The military claims that at least 165 militants have been killed in the past three days, including 38 on Wednesday, as al-Qaida continues a costly but determined assault aimed at expanding a swath of the south under their control. The officials said six civilians fighting alongside the army were also killed.
Another 12 militants were killed when a vehicle stolen by al-Qaida from an army post in recent days was hit by an airstrike. Residents said the vehicle took a direct hit, leaving it totally destroyed with bodies strewn nearby. They and the officials spoke on condition of anonymity because of the sensitivity of the subject.
US officials could not immediately be reached for comment. US drones have targeted al-Qaida leaders in Yemen in the past.
The fighting is the latest in a series of bloody confrontations between government forces and al-Qaida-linked militants in southern Yemen, where the militants control a patchwork of towns taken mostly last year in the chaos that surrounded the popular uprising against longtime leader Ali Abdullah Saleh.
The Defense Ministry said in a statement that those killed Wednesday included two senior members of the militant network in the area. It identified them as Imad al-Manshaby and Ahmed Mohammed Taher. Other security officials said the dead also included Saudis, Somalis and a Pakistani. They did not specify how many were foreigners.
Often the fighting in the south has gone against the government, with demoralized and unprepared Yemeni army garrisons taking heavy losses from determined militant assaults.
In some cities like Lawder, the army has received critical help from residents who have become fed up with the government's inability to protect them and, in a country where most adult males possess weapons, have taken up arms to protect themselves.
There are an estimated 300 mostly young men armed with assault rifles and rocket-propelled grenades who have joined the government side in the fight. But they are running low on ammunition and food supplies, according to one of their leaders, Jihad Hafeez. Many of the town's residents have left the city to escape the fighting, he said.
Military officials say that al-Qaida appears determined to take the town despite the losses it has suffered. Lawder lies on a key highway that links Abyan province's capital Zinjibar, an al-Qaida stronghold, with other provinces further east like Hadramawt, Bayda and Shabwa where the group is also active.
Al-Qaida was once present in Lawder, but in July residents drove them out. The militants have since been trying to regain their foothold in the town, which has a population of about 30,000.
Al-Qaida have become the de facto government in the towns they control, and in some places appear to be implementing a harsh version of Islamic law. In the town of Rada, in Bayda province, militants beheaded a woman on allegations that she practiced witchcraft, two security officials said on Wednesday. The head of the 35-year old woman was later found hanging on a door in the city as a warning but her body remains missing, the officials said.
Al-Qaida's branch in Yemen, known as al-Qaida in the Arabian Peninsula, is one of the movement's most dangerous offshoots.
Saleh, who left office in February as part of a US-backed deal, was Washington's longtime partner in the fight against the terror network's branch in this impoverished Arab nation. But Saleh was frequently found to be unreliable, turning a blind eye to the growing strength of militant groups as part of an elaborate balancing act to maintain his grip on the fractured nation located in the southern part of the Arabian Peninsula.
Yemen's popular uprising, which was inspired by Arab revolts elsewhere, succeeded in pushing Saleh from power. His successor and former deputy, Abed Rabbo Mansour Hadi, was later rubber-stamped as president in a single-candidate nationwide vote that was part of the power transfer deal.
Washington hopes that Hadi can bolster the government's authority and make good on his pledges to fight al-Qaida. But in addition to his war with the militants, he also faces a challenge from Saleh loyalists and a crippled economy.