Islamist militants raised their flag over the citadel at Radda and pledged allegiance to al Qaeda leader Ayman al-Zawahri after seizing the Yemeni town southeast of the capital Sanaa, residents said on Monday.
The move is likely to raise concern in neighbouring Saudi Arabia, the world's No. 1 oil exporter, and the United States about al Qaeda's spreading presence in Yemen, which lies next to important oil and cargo shipping lanes in the Red Sea.
Washington and Riyadh are pushing for implementation of a deal signed in November under which Yemeni President Ali Abdullah Saleh formally handed power to his deputy to calm unrest and restore order in the impoverished country.
Radda residents said the militants, who stormed the town of 60,000 people overnight on Saturday, had killed two policemen, seized the local prison and five police vehicles and were besieging government buildings.
Al Qaeda has raised its flag over the citadel, one resident told Reuters by telephone. Its members have spread out across the town's neighbourhoods after pledging allegiance to Ayman al-Zawahri during evening prayers (on Sunday).
Yemeni state television reported that Radda residents were appealing to the government to send in troops to free the town. But no government officials were immediately available to comment on the report.
The raid on Radda, in the al-Baydah province, appeared to mirror an attack earlier last year when the militants seized the city of Zinjibar, capital of the southern province of Abyan. The militants have since captured at least two other smaller towns in the area.
A police source and witnesses said the gunmen, led by an al Qaeda militant recently handed over by Syria to Yemen, met little resistance from a small police contingent based in the town, and declared Tareq al-Dahab, a brother-in-law of a U.S.-born Muslim cleric killed in an air strike last year, emir of Radda.
The capture of the town triggered an exchange of charges of collusion with the militants between Saleh supporters and his opponents in a coalition of parties that have led demands for his departure after 33 years in office.
Saleh signed a deal brokered by Yemen's Gulf neighbours in November under which he transferred his powers to his deputy, Abd-Rabbu Mansour Hadi, paving the way for a unity government between the opposition Joint Meeting Parties and the ruling General People's Congress to be formed.
But Saleh is still in Yemen. He retains the title of president and wields a great deal of power through relatives who
control various branches of the security forces, including the powerful Republican Guards.
The anti-Saleh unrest has emboldened groups linked to al Qaeda's Yemen-based wing, which the United States has called the most dangerous branch of the militant network.
The United States and Saudi Arabia backed the autocratic Saleh for much of his time in power, fearing that any vacuum would be exploited by the Yemen-based al Qaeda in the Arabian Peninsula, or AQAP. As street protests intensified against Saleh, however, they endorsed the Gulf-brokered deal for Saleh to step down.
But little headway towards reinstating order on the ground has been made since then.
Fighting against Islamist militants in the south has continued, forcing about 97,000 people to flee. More than 300,000 others have been displaced by tribal rebellion in north Yemen, according to U.N. estimates.
(Reporting by Mohammed Ghobari, writing by Sami Aboudi; Editing by Mark Heinrich and Giles Elgood)