Al Qaeda is now control of a town 100 miles south of Yemen's capital after seizing key parts of Radda over the weekend and setting up a ring around the town, securing it from entry.
Operatives killed two soldiers and wounded a third in clashes with army troops.
The fighters also stormed the local prison, freeing between 150 and 200 prisoners, including al Qaeda terrorists, who were given weapons.
Security officials estimated the number of militants controlling the town to be around 200.
The move showed the growing strength of al Qaeda in Yemen as it continues to take advantage of the weakness of a central government struggling to contain nearly a year of massive anti-government protests.