The jihadist advance into the Abyan province towns of Loder, Shaqra and Ahwar came as the White House defended Sunday's raid on an Al-Qaeda compound as a "success", even though multiple civilians and a Navy SEAL were killed.
Abyan has long been an Al-Qaeda stronghold and it was only through a major offensive backed by a Saudi-led coalition last summer that the government was able to drive its fighters out of the province's main towns.
The jihadists' entry into Loder and Shaqra on Thursday evening was helped by a pullout by government forces angry over the late payment of their wages, a security official told AFP.
"Our forces are also angry that they have not been provided with the weapons and other equipment to confront the jihadists, who have been stepping up their armed attacks," the official said.
Al-Qaeda fighters set up roadblocks around the towns and blew up two security service buildings.
Saudi-led aircraft carried out two strikes on jihadist positions in Loder overnight, the official added.
Tribal sources said there were fears that the jihadists would now move on the provincial capital Zinjibar.
Zinjibar lies just 50 kilometres (30 miles) from Yemen's second city Aden where the government is based.
Al-Qaeda has taken advantage of nearly two years of fighting between government forces and Shiite rebels who control the capital Sanaa to entrench its presence in the south.
Washington has kept up its long-running drone war against the jihadists but that has done little to dent their influence.
Sunday's raid on an Al-Qaeda compound in Baida province was the first such operation of Donald Trump's presidency.
Navy SEAL Team Chief Special Warfare Operator William "Ryan" Owens, 36, was killed and three other US troops were wounded in a fierce gunfight.
And on Wednesday, the Pentagon acknowledged that several non-combatants, including children, had apparently been killed.
A Yemeni provincial official said eight women and eight children died.
The International Crisis Group think-tank warned on Thursday that operations like the Baida raid risked fanning hostility towards the United States among civilians, providing fertile ground for recruitment by Al-Qaeda.
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