Pro-government forces expelled Al-Qaeda fighters from a provincial capital close to Yemen's second city of Aden on Friday, security officials said.
Soldiers and police drove the jihadists out of Huta, 30 kilometres north of Aden, and arrested 49 people suspected of being militants, they said.
A ceasefire has been in place in Yemen since last Sunday, although fighting is continuing in pockets across the country.
At least 35 pro-government fighters were killed during the first three days of the truce, according to military sources.
The ceasefire is meant to lay the groundwork for peace talks in Kuwait due to begin on Monday.
Saudi Arabia and its Arab allies are backing the Yemeni government in the conflict while Iran supports Houthi rebels who have seized the capital Sanaa and other regions.
Al-Qaeda and the Islamic State (IS) group have taken advantage of the chaos caused by the war to strengthen their grip on southern Yemen.
Forces loyal to President Abedrabbo Mansour Hadi have launched operations against jihadists in recent weeks, backed by the firepower of the Arab coalition.
A military official said the operation to liberate Huta was "designed to secure Aden", where Hadi's government has temporarily based itself.
A car bomb exploded on Friday in the port city near a building housing the foreign ministry, without causing casualties, security sources said.
IS claimed responsibility for the attack, in postings on Islamist websites, and also for a suicide bombing on Tuesday in Aden targeting army recruits that left five dead.
Security officials in the city had blamed Al-Qaeda for that attack.
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