ADEN (AFP) - Al-Qaeda militants in war-torn Yemen on Friday seized an army base in the southeastern city of Mukalla, which is now almost entirely under their control, a military official said.

Residents were seen fleeing the city in panic.

Al-Qaeda "took the headquarters of the 2nd Military Region in the afternoon without resistance", the official said, a day after the extremists stormed a prison in the city and freed hundreds of inmates.

The regional commander and his troops withdrew to military camps around the airport, one of the few areas in the city not yet under the control of Al-Qaeda, the official said.

The militants captured a tank and two armoured vehicles. Earlier they also took the city's port.

Members of Al-Qaeda in the Arabian Peninsula (AQAP) also paraded the black banner of the extremist network through the city of more than 200,000 people, witnesses said.

The Sunni extremists launched calls from mosques in the city for "jihad against Shi'ites", according to residents.

Yemen has sunk further into chaos since a Saudi-led coalition launched air strikes on March 26 against Shi'ite rebels and their allies who have seized large parts of the country including the capital Sanaa.

Observers have warned that AQAP, which Washington considers the network's deadliest franchise, could exploit the unrest to expand its foothold in Yemen.

Before the latest chaos erupted, Yemen had been a key US ally in the fight against Al-Qaeda, allowing Washington to carry out drone attacks on its territory.