At least 27 Yemeni soldiers were killed in a government offensive, backed by Saudi-led forces, which drove Al-Qaeda militants out of a key southeastern city, military officials and medics said Wednesday.
Life, meanwhile, was returning to normal in the port city, residents said.
More than 60 other soldiers were wounded in the operations that began at the weekend and saw government forces recapture Mukalla, the provincial capital of Hadramawt, the officials said.
The city had been held by Al-Qaeda militants for over a year.
Recapturing Mukalla was part of a wider counter-offensive against the Sunni extremists launched by pro-government forces last month after a year in which they had focused their firepower on Shiite Huthi rebels who control the capital.
Government troops were backed by special forces from Saudi Arabia and the United Arab Emirates, as well as coalition air strikes, the Arab coalition said, claiming 800 militants were killed in the offensive.
Life began to return to normal Wednesday in Mukalla, a city of some 200,000 people, as shops and government offices reopened, residents said.
Staff at Mukalla airport and its port also returned to work for the first time since April last year, when militants of Al-Qaeda in the Arabian Peninsula (AQAP) took over, officials in the city said.
During its year-long rule, AQAP imposed its strict interpretation of sharia law forbidding consumption of the mild narcotic qat, a mainstay of Yemeni social life, and demolishing the tombs of revered Sufi mystics.
On Tuesday, a US drone rocketed the car of an Al-Qaeda chief in Zinjibar, in neighbouring Abyan province, Ali al-Shanna, killing his driver but he was not in the vehicle, security sources said.
Washington has been waging a drone war against AQAP since November 2002, when it killed the suspected mastermind of an October 2000 bombing of a US destroyer that killed 17 sailors in the southern port of Aden.