The AFP news agency also recorded the clashes, but reported that most of the injured were Yemeni policemen, citing an unnamed medical source.
Witnesses and southern media said Yemeni security forces had surrounded Dalea city from all sides at dawn on Saturday and raided a number of houses, sparking clashes with armed groups.
The violence spread to many parts of the city, the news website Sahwa Net reported.
Reuters reported residents as saying an indefinite curfew had been announced for 6pm local time (15:00 GMT).
North and South Yemen formally united in 1990, but many in the south, where most of the country's oil facilities are located, complain northerners have used unification to seize resources.
Yemen has become a major security concern for Western nations, who fear al-Qaeda are using the country's instability to recruit and train fighters.
In addition to tackling secessionist sentiment in the South and fighting al-Qaeda, the government is also trying to bring an end to a Shia rebellion in the North.