At least 45 people have been killed in the southern Yemeni town of Zinjibar.
The military described 30 of the dead as Islamist militants and said 15 soldiers were also killed.
Meanwhile, it has emerged that Yemeni President Ali Abdullah Saleh's injuries from a rocket attack on his palace at the weekend were more serious than previously reported.
A Yemeni official has said that Saleh was in a more serious condition with burns over roughly 40% of his body.
In the capital Sanaa, thousands of protesters gathered in front of the Yemeni vice president's residence on Tuesday, demanding the acting leader for wounded President Ali Abdullah Saleh form a transitional council to create a new government.
The fighting is another incident of instability in Yemen, which saw President Ali Abdullah Saleh leave for Saudi Arabia after sustaining injuries in an attack on his presidential compound on Friday.
Yemen's acting leader, Vice President Abu-Rabbu Mansour Hadi, has insisted that President Saleh will return within days.
Saudi officials say it is up to President Saleh whether he returns or not, but they and their Western allies may want to revive a Gulf-brokered transition deal under which the Yemeni leader would quit in return for immunity from prosecution.
Recent fighting has reduced Zinjibar, once home to more than 50,000 people, to a ghost town without power or running water.
Fighting also flared again overnight in the city of Taiz, south of Sanaa, where anti-government gunmen have clashed sporadically with troops in the past few days.
A Saudi-brokered truce was holding in the capital after two weeks of fighting between Saleh's forces and tribesmen in which over 200 people were killed and thousands forced to flee.
President Saleh has defied pressure to accept the transition plan brokered by the Saudi-led Gulf Cooperation Council. He has backed away from signing it on three occasions.
