Two al Qaeda militants and a Yemeni soldier were killed on Friday in a raid by security forces on a residential building in the southern city of Dalea, local officials said.
The security forces seized a large quantity of weapons, the officials said without elaborating, Reuters reported.
There have been a succession of violent incidents in recent months in Dalea, a stronghold for separatists demanding restoration of the former socialist state of South Yemen, which merged with the North in 1990.
Dalea province has seen regular but small-scale clashes between armed men and government troops since late December, when a shell fired by Yemeni soldiers hit a funeral attended by separatists, killing 15 people, including children.
Tackling lawlessness in Yemen, an impoverished Arabian Peninsula state bordering the world's biggest oil exporter Saudi Arabia, is an international priority. The United States views Yemen as a front line in its struggle against al Qaeda.