Yemen's army raided Al-Qaeda positions in the southern province of Abyan on Thursday, killing eight militants as battles between Islamists and civilians killed another two, local sources said.
"The Yemeni air force carried out four raids on Al-Qaeda positions" on the outskirts of Loder killing eight militants in Al-Ain, on the town's southern entrance, said one armed civilian.
The air strike hit an army tank seized by the militants, who were trying to bring in from the provincial capital Zinjibar.
The army also fired artillery rounds Al-Qaeda positions outside Loder, residents said.
A source from the the Al-Qaeda-held town of Jaar, where the bodies of dead militants are usually taken, confirmed the toll and said the victims included three Egyptians, two Afghans and a Somali.
The militants have been trying to seize Loder since they launched an assault on an army barracks in the town on Monday, residents said.
Meanwhile, the fighting spread to neighbouring Mudia, where armed men attacked a vehicle outside the town carrying Al-Qaeda militants from nearby Shabwa province to Loder, the sources told AFP.
"The militants traded machinegun fire" with the armed civilians, who have formed "popular resistance committees," leaving one dead on each side, they said.
Residents of Abyan, mainly from Loder and Mudia, formed the armed groups in 2011 after Al-Qaeda militants overran Zinjibar.
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For their part, the Islamist insurgents fired mortar rounds on Loder and wounded 17 civilians, including two young children and an elderly woman, a committee spokesman and residents said.
Flames also erupted from the power plant that supplies electricity to Loder and Mudia when it was hit by a mortar round the extremists fired, the source said.
"Al-Qaeda militants are shelling our town and targeting civilians," one tribesman said. "It is random, vengeful shelling."
Loder lies some 150 kilometres (95 miles) northeast of Zinjibar, which militants of the Al-Qaeda-linked Partisans of Sharia (Islamic law) overran last May.
Al-Qaeda briefly seized Loder in August 2010 before being driven out by the army, while armed men from Assal tribe also drove the militants out of Mudia.
A tribal source said the militants wanted to recapture it because of its strategic location between Shabwa, Bayda and Lahij provinces where Al-Qaeda in the Arabian Peninsula, or AQAP, is also active.
Abyan has fallen completely under the control of the terror network except for Loder and Mudia.
The latest deaths bring the toll from the Mudia and Loder battles alone to at least 185 people killed in four days.
Separately, the army killed four militants -- among them an Indonesian and a Tunisian -- in shelling their hideouts in Zinjibar, a source in the adjacent town of Jaar said.
The United States considers the Yemen-based AQAP to be the most deadly and active branch of the global terror network.