Yemeni troops and tribesmen advanced on the southern coastal town of Shaqra on Thursday, driving out al-Qaeda linked militants in a U.S.-backed offensive to recapture territory, a local official and residents said.
Government troops and tribal fighters were a few kilometres from Shaqra after retaking the area held by the insurgents on the outskirts of the town on Wednesday.
Many of the insurgents fled at dawn and headed toward the town of Azzan after setting fire to two tanks and other military equipment, residents of Shaqra said.
The militants were forced out of their major strongholds of Zinjibar and Jaar on Tuesday in the army's most significant victory against them in more than a year of turmoil that has taken Yemen to the brink of civil war.
Emboldened by waning government control over the country during last year's popular protests that ousted former President Ali Abdullah Saleh, militants seized Jaar in March 2011, before occupying Zinjibar and Shaqra.
Their advance fuelled fears about al Qaeda's presence in a country next to Saudi Arabia, the world's top oil exporter, and close to major shipping lanes.
Some residents of the wrecked towns of Zinjibar and Jaar have begun to return to their homes, with Yemeni forces providing security.
Militants of Ansar al-Sharia, an al Qaeda offshoot, vowed to spread the war across Yemen after they were forced to abandon the towns, according to the SITE Intelligence Group which monitors militant websites.
U.S. officials say President Abd-Rabbu Mansour Hadi - who came to power in February after Saleh signed a power transfer deal brokered by the Gulf states - is more cooperative in the fight against Islamist militancy than his predecessor.
Al Qaeda in the Arabian Peninsula (AQAP) is believed to be the most active branch of the global network and has plotted a number of botched attempts against U.S. targets.