Forty soldiers were killed and another 100 wounded in the operation in the provinces of Shabwa and Abyan, in which 39 militants were captured, Colonel Saeed al-Fakeih told reporters.
"We will press on with our war against Al-Qaeda, especially in the regions that (militants) fled to," he said.
The army launched the offensive against Al-Qaeda in Shabwa and neighbouring Abyan in a bid to expel its forces from smaller towns and villages that escaped a previous sweep in 2012.
Taking advantage of a collapse of central authority during a 2011 uprising that forced veteran strongman Ali Abdullah Saleh from power, Al-Qaeda seized large swathes of the south and east.
They remain deeply entrenched in Hadramawt province further east, where they have carried out a series of spectacular attacks in recent months.