SANAA, Yemen - Islamic militants seized control of a weapons factory and a nearby town in Yemen's south Sunday, said a witness and security officials, as political turmoil around the country causes security to unravel.

Yemen is a key U.S. ally in the fight against al Qaeda, and the fall of the town and factory is another blow to efforts to rein in the group that has several hundred fighters scattered through the country.

The country, which is plagued by a tenacious franchise of al Qaeda hiding out in its remote provinces, has also been rocked in recent weeks by popular protests against the long-serving president.

The militants set up checkpoints around the small factory and the town of al-Husn, patrolling the streets and searching cars, said resident Wahib Abdul-Qader.

The militants are also battling security forces for control of a nearby Khanfar mountain that holds a radio station and a presidential guest house, said Saleh al-Shamsi, the head of security in the southern province of Abyan.

The area is known as a stronghold of al Qaeda in Yemen.

On Saturday, militants also took control of the town of Jaar, al-Shamsi added.

Residents have pushed out police and soldiers in other towns in the province, and created their own local militias to protect themselves, said al-Shamsi.

In another province of Yemen, security officials say suspected al Qaeda gunmen killed seven soldiers and wounded seven others in an attack on a military post. The attack took place at Ubaida area in the central Marib province, another province where the militant group is active and only under nominal government control.

The officials, speaking on condition of anonymity because they are not authorized to brief the media, said the attackers set fire to a pickup truck mounted with machine-gun and made off with an armoured vehicle belonged to the post.

Al Qaeda has seized control of towns in southern Yemen before, but in the past was vigorously confronted by security forces loyal to President Ali Abdullah Saleh. With Yemeni authorities now focused on the protests, it remains to be seen if anyone will challenge emboldened militant groups.

The instability highlights the unraveling security situation throughout Yemen as a stalemate ensues between the country's president of 32 years and hundreds of thousands of citizens who want him to leave power.

They have camped in cities and towns for weeks now, demanding his ouster, inspired by the wave of people power sweeping the Middle East. After forces to Saleh opened fire on demonstrators last week, killing over 40, the protesters' ranks were bolstered by a series of high-level officials from the country's military, diplomatic corps and civil servants, including the president's former chief adviser, Ali Mohsen.

But Saleh refuses to step down immediately, saying it would draw the country into a long civil war. He has offered to resign at the end of the year after setting new elections.

"Yemen is a ticking bomb and if the political system collapses and there's no constructive dialogue there will be a long civil war that will be difficult to end," he told the Al-Arabiya network.