The dawn attack is the latest in a series of bloody battles in recent months that mark an escalation in al-Qaeda's efforts to expand its control around a swath of land it seized last year. The group took advantage of the country's political turmoil to overrun cities and towns in southern Yemen.
The militant movement appears to be on the offencive, assaulting and sometimes overrunning army positions, although it also suffers reverses.
The officials said this latest assault fell on an outpost in the town of Lawder in Abyan province, some 155 miles southeast of the capital of Sanaa.
Residents and military officials said 40 militants were killed in the clashes. Additionally, 18 soldiers, including a colonel, were killed battling the militants, officials said.
Six civilians allied with the army were also reported killed.
Yemen's military in the south, poorly equipped and low on morale after a series of defeats, has not been able to fight the group and its supporters alone.
In cities like Lawder, residents have become fed up with the government's inability to protect them and, in a country where tribes posses weapons, have taken up arms to protect themselves.
The military said it used artillery to pound al-Qaeda from a distance, but local civilians appear to have done much of the close-in fighting.