"The Yemeni air force carried out four raids on Al-Qaeda positions" on the outskirts of Loder killing eight militants in Al-Ain, on the town's southern entrance, said one armed civilian.
The air strike hit an army tank seized by the militants, who were trying to bring in from the provincial capital Zinjibar.
The army also fired artillery rounds Al-Qaeda positions outside Loder, residents said.
A source from the the Al-Qaeda-held town of Jaar, where the bodies of dead militants are usually taken, confirmed the toll and said the victims included three Egyptians, two Afghans and a Somali.
The militants have been trying to seize Loder since they launched an assault on an army barracks in the town on Monday, residents said.
Meanwhile, the fighting spread to neighbouring Mudia, where armed men attacked a vehicle outside the town carrying Al-Qaeda militants from nearby Shabwa province to Loder, the sources told AFP.
"The militants traded machinegun fire" with the armed civilians, who have formed "popular resistance committees," leaving one dead on each side, they said.
Residents of Abyan, mainly from Loder and Mudia, formed the armed groups in 2011 after Al-Qaeda militants overran Zinjibar.