Militants are leaving a Yemeni town they seized last week in exchange for the formation of a council to govern it and the release of several jailed comrades, a tribesman involved in the negotiations said.

Islamist militants took over Radda one week ago, led by Tareq al-Dahab, a relative of U.S. citizen Anwar al-Awlaki, whom Washington accused of a main role in the Yemeni branch of al Qaeda and assassinated in a drone strike last year.

The capture of the town, about 170 km (105 miles) southeast of Sanaa, underscored concerns that protracted political upheaval in Yemen over the fate of outgoing President Ali Abdullah Saleh could give al Qaeda's regional wing a foothold near oil shipping routes through the Red Sea.

Dahab had demanded the release of several prisoners including his brother Nabil, as well as the formation of a council to run the town under Islamic law, but previous efforts to broker the militant group's withdrawal fell through.

"According to the deal which is due to be implemented on Wednesday, the leader of the group must withdraw his followers from the town and move to... a rural area located far from the town until the al Qaeda operatives are freed from the central security prison," said tribal leader Ahmed al-Kalz, who took part in the talks, late on Tuesday.

Dahab was handed the sons of two senior tribesmen as surety against the release of 15 militants held by intelligence services, Kalz said, adding that the council set up to rule Radda would follow the laws of Yemen.

"The negotiators told Dahab that all the laws of Yemen are based on Islamic law and that there is no contradiction in that," said Kalz.

Since protests erupted early last year demanding an end to Saleh's 33-year rule, Islamist militants have exploited weakened central government control to seize chunks of territory, notably in the southern province of Abyan.

Opponents of Saleh accuse him of exaggerating and even encouraging militancy to scare the United States and Saudi Arabia - both targets of abortive attacks by al Qaeda's Yemen-based wing - into backing him.

Saleh left Sanaa on Sunday for medical treatment in the United States, but said in a parting speech that he would return to Yemen.