Security forces opened fire on protesters in the southern Yemen city of Taiz, killing two people, pro-democracy activists said, dpa reported.
The protesters were teachers demanding higher salaries and a delay in the schedules for examinations. They were demonstrating near the education department in densely populated Taiz when police fired at them.
The toll was expected to rise as several seriously wounded people were rushed to hospital, a doctor told the German Press Agency dpa.
Tens of thousands of people have been staging demonstrations across Yemen for weeks, calling for an end to President Ali Abdullah Saleh's 32-year rule.
Meanwhile, Yemen's largest opposition group on Sunday warned the ruling party against any further delays in the Gulf-brokered transition deal, which aims at ending the unrest in the country.
The Joint Meeting Parties (JMP) coalition said the postponement, which was caused by Saleh's refusal to sign the deal, was unacceptable.
Protesters on Saturday called on the Gulf Cooperation Council (GCC) to withdraw a power transition plan that has the eventual goal of putting an end to tensions in Yemen.
Yemen's pro-democracy demonstrators have repeatedly said they disapprove of the deal, which guarantees Saleh immunity from prosecution. They say they will not stop demonstrating until Saleh is also tried for the deaths of more than 100 protesters.
Under the proposed deal, the president would also retain the right to remain as head of the ruling party.
Saleh has also backtracked on earlier statements that indicated that he had accepted the Gulf proposal to step down and transfer powers to his vice president in a government of national unity.
The GCC said it would continue to work on getting both the opposition and Saleh to sign the deal in order to maintain stability and security in Yemen.
Caretaker Prime Minister Ali Mujawar went on a Gulf tour on Sunday, excluding Qatar, which Saleh accused of being "involved in a conspiracy" against Yemen.
The GCC comprises six Gulf countries: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates.