Azzan, the last al-Qaida in the Arabian Peninsula (AQAP) stronghold in south Yemen, is to be handed over to government authorities within days, two Yemeni senior security officials in Shabwa province told CNN on Saturday.
Defense Minister Mohammed Nasser is in Shabwa leading the military preparations for the takeover of the town.
"We will continue going forward until victory is accomplished," Nasser said.
Nasser met with top security aides and Shabwa's governor on Saturday while tribal leaders in the province led negotiations seeking a peaceful handover of Azzan.
The Defense Ministry said that troops surrounding Azzan are awaiting orders to attack.
Eyewitnesses in the town told CNN that AQAP fighters were seen selling their belongings and informing residents that they will not be back.
But hundreds of militants refused to leave. Vehicles overloaded with heavy artillery were seen entering Azzan early Saturday morning, according to eyewitnesses.
The senior security officials said that civilians also are fleeing Azzan for major cities nearby.
"If clashes start in Azzan, many people will die, including civilians. The government is keeping all options open," said one senior security official in Shabwa, speaking on condition of anonymity because he is not authorized to talk to media.
Twenty-six AQAP militants were killed in Shabwa since Friday, the security official said. "After the fall of Jaar, the remaining towns under al-Qaida are falling quickly," said the official.
The United States on Saturday lauded recent government gains against AQAP.
"The United States commends the success of the Yemeni government, military, and people in retaking important areas of southern Yemen," State Department spokeswoman Victoria Nuland said in a statement.
"We extend our deepest condolences for those who lost their lives and note the courageous efforts of Yemeni citizens who joined with the Yemeni military in the fight against terrorism," Nuland said. "Their bravery serves as a reminder that the Yemeni population rejects al-Qaida and the violence it promotes."
Ahmed al-Bahri, who holds a leadership position in the Haq party, told CNN that although troops are gaining ground in the war on terror, the limping AQAP is still capable of attacking government and foreign interests.
"Terrorists are choking and attacks against them must continue to ensure they do not regroup and are defeated," said al-Bahri.
"Al-Qaida has been causing chaos in Yemen for years and their defeat means the country has a chance to prosper," he said.
AQAP, a regional affiliate of al-Qaida, has endured devastating defeats over the last week at the hands of government troops backed by hundreds of local resistance fighters.
Ansar al-Sharia, an offshoot of al-Qaida, took over Abyan and areas of Shabwa last May, benefiting from a divided military and a political crisis that ripped the country and resulted in a power transfer deal.
New President Abdurabu Hadi said that uprooting the militant network was Yemen's top priority and key to its stability.
The Sanaa-based Abaad Strategic Center recently told CNN that the current government success in the war against AQAP came after the military was united and now serves a nation rather than factions.
"With a divided military last year, terror networks gained power and ground. The power transfer last February played a major role in weakening al-Qaida," said Abdul Salam Mohammed, president of the center.