Separatist forces of the Southern Transitional Council (STC) are resisting an offensive by pro-government troops launched on the outskirts of Zinjibar, some 60 kilometres from the main southern city of Aden.
"Fourteen fighters, including ten pro-government soldiers, were killed on Saturday," a government military official told AFP on condition of anonymity.
The toll was confirmed by a separatist military source, who also claimed the capture of "40 pro-government soldiers and the seizure of military equipment".
"They [pro-government soldiers] were unable to advance toward Zinjibar and they will only get there over our dead bodies," a separatist commander on the front line told AFP.
The offensive was being carried out by the military wing of the Islamist party Al Islah -- allied to the government -- according to several sources.
The fighting is the first major confrontation since the separatists declared self-rule in southern Yemen on 26 April, accusing the government of failing to carry out its duties and of "conspiring" against their cause.
At least ten fighters were killed and many were wounded on both sides in fighting on Monday.
The clashes complicate Yemen's war between the government -- backed by a Saudi-led military coalition -- and Iran-backed Houthi rebels who control much of the north, including the capital Sanaa.
The government and the STC have technically been allies in the long war against the Houthis.
But the separatists in the south, which used to be an independent country, have agitated to break away again -- a campaign that was temporarily put to rest with a power-sharing deal signed in Riyadh last November.
Over the past six years, the Yemen conflict has killed tens of thousands of people, mostly civilians, and triggered what the United Nations considers to be the world's worst humanitarian crisis.