Al-Qaida and Islamic militants have taken over the Yemni coastal town of Zinjibar, residents told Reuters on Sunday.
"About 300 Islamic militants and al-Qaida men came into Zinjibar and took over everything on Friday," said one resident.
Zinjibar is the capital of Abyan province in south central Yemen. The impoverished state has been wracked by violence amid protests to end President Ali Abdullah Saleh's near 33-year rule.
Washington considers the Yemen-based al-Qaida branch the world's most active terror cell. The group has strongholds in remote mountain regions in the provinces of Shabwa, Abyan, Jouf and Marib.
Earlier this month, Saleh warned that al-Qaida could take over in many parts of the Arabian Peninsula country if he leaves office under a Gulf-brokered deal which he said he has accepted.
The Yemeni president is yet to step down.
"If the system falls...al-Qaida will capture Maarib, Hadramout,Shabwa, Abyan and al-Jouf (and) it will control the situation," Saleh said, listing provinces where al-Qaida's Yemen-based wing has been active.
"This is the message that I send to our friends and brothers in the United States and the European Union ... the successor will be worse that what we have currently," Saleh said.
Washington and Riyadh, both targets of foiled attacks by al-Qaida's Yemen-based wing, are keen to end a stalemate that has pushed Yemen further to the brink of chaos and could give al-Qaida more room to operate.
Saleh has survived many tussles with rivals, skillfully using patronage and favors to keep tribal and political backers loyal.
Even before the wave of pro-democracy protests against his rule, Saleh was struggling to quell a separatist rebellion in the south and a Shi'ite insurgency in the north.
Yemen, where half of its 23 million people own a gun, and already facing regional rebellions, has become a concern for regional stability among its Gulf neighbors, particularly oil giant Saudi Arabia, as well as the United States, which has seen Yemen as an ally against al-Qaida.
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