The bombing is the latest in a spate of attacks by militants, who have escalated their operations in Yemen's south since President Abd-Rabbu Mansour Hadi took office last month vowing to fight Al-Qaeda's regional wing.

At least four soldiers were wounded in the attack outside the southern city of Al-Bayda, the police source told Reuters. The governor of Al-Bayda province said clashes between the army and "terrorists" erupted after the explosion.

"The attacker who drove the car made it explode when it stopped at a checkpoint," the source said. "It scattered into tiny pieces, killing four soldiers instantly. Four others were taken to the hospital with critical wounds."

Militant group Ansar Al-Shariah said it was responsible for the bombing and put the number of soldiers killed at 27, in a text message purporting to come from them. It said three of its own fighters had also been killed.

The governor of Al-Bayda said the dead militants included two local Al-Qaeda leaders.

The militant group said the attack was in revenge for recent air strikes on Al-Bayda and Abyan provinces, which it blamed on US drones. Washington has repeatedly used drones to target militants in Yemen.

More than 60 fighters have been killed over the past week in air strikes attributed to the United States and Yemen.

The campaign follows a series of attacks by militants on the army, the deadliest of which killed at least 110 conscripts last week.

Ansar Al-Shariah also said it had taken one soldier captive, in addition to the 73 it already claims to be holding. In a statement posted on Islamist forums on Monday, the militants said they would give free passage to the 73 in exchange for the release of their imprisoned fellow Islamists.

In a separate posting, a video showed a local leader of Ansar Al-Shariah in Abyan speaking to a group of more than 50 men it identified as the captive soldiers.

"Don't you want the law of God?," asked Jalal Al-Marqishi to a chorus of "yes" from the captives, who sat cross-legged on the floor beneath him. "Today we are occupied and you are occupied... Americans hold the Yemeni security portfolio today."

Wary of Al-Qaeda's presence in Yemen, Washington backed Hadi's election last month under an Arab Gulf-brokered deal to ease his predecessor Ali Abdullah Saleh from power after a year of protests against him.