Local fighters loyal to Saleh, who was killed by the Iran-aligned Houthis after switching sides in the civil war, captured Al-Khoukha district about 350 km south-west of the capital Sanaa after heavy fighting over Wednesday night which also involved coalition forces.
Houthi forces control Sanaa and much of the rest of the impoverished country.
Saleh had helped the Houthis win control of Sanaa and much of the north and his decision to abandon them had major implications on the battlefield.
The Houthis crushed a pro-Saleh uprising in the capital and shot him dead in an attack on his convoy on Dec. 4.
The US and UK-backed Saudi-led Arab coalition has stepped up airstrikes on Yemen since then as Houthi forces have tightened their grip on the capital.
Residents said Saleh’s killing spurred opposition to the Houthis and fighters known as the Southern Resistance, together with other local militia and backed by coalition advisers from the UAE, launched attacks on Al-Khoukha on Wednesday.
At least 25 people from both sides were killed in the fighting before Yemeni fighters captured the town of Al-Khoukha and a small fishing port.
When Saleh switched sides he announced he was ready to end a nearly three-year-old war.