"The camp was taken by surprise by the air force bombing them. Some people ran towards the water canal, but they were killed when the plane fired at them again," he said.
An ambulance driver said 120 people had been taken to a local hospital on Wednesday, with dozens of dead among them.
Sheik Mohammed Hassan, a tribal leader who attended a mass funeral for the victims on Thursday, said most of the dead were women and children.
The strikes hit near a school as well as a bridge under which many had taken shelter from the bombardment, crushing them, Hassan said.
"The situation is horrendous. Whoever did this must be held accountable,'' he said.
Houthi fighters, who earlier this week posted images online of dead and injured people from an alleged air raid in al-Talh, in the northern town of Saada, accused the government of committing "brutal crimes".
The Yemen Centre for Human Rights, a non-governmental organisation, said it had evidence that aircraft had targeted a crowded market area in al-Talh on Monday, causing dozens of casualties.
"The centre calls on the Yemeni government, as the party responsible for protecting lives, to order an end to targeting civilians," a statement said, asking for "humanitarian corridors" so people and aid could move in safety.
Yemen's Supreme Security Committee, which is headed by Ali Abdullah Saleh, the Yemeni president, ordered an investigation into the reports, the state news agency SABA reported.
It cited an unidentified official from the committee
as accusing rebels of using civilians as human shields and preventing civilians from moving to safe areas.
The Houthis say they want autonomy and accuse Ali Abdallah Saleh, the Yemeni president, of tyranny, corruption and escalating a conflict that began in 2004.
The Red Cross has registered about 30,000 civilians as displaced in the latest round of fighting which broke out in Saada and Amran provinces last month.