The bomber appeared to be targeting the head of a group of tribal fighters that sided with the Yemeni army during an offensive that drove al Qaeda-linked militants from their strongholds in the southern province of Abyan.
"This is a cowardly, criminal, terrorist attack," said Abyan governor Jamal al Aqel.
An investigation is under way to determine the bomber's identity. The attack highlighted the enduring threat of Islamist militancy in Yemen and may alarm the United States and Saudi Arabia.
They increasingly view the impoverished Arabian state as a front-line in their war on al Qaeda and its affiliates.
Charred bodies were strewn around the site of the blast. Abdul Latif Al Sayed, the leader of tribal fighting units known as "popular committees", who has previously survived assassination attempts, was injured. Two of his brothers were killed.
Further east in the province of Hadramout, a US drone fired on a vehicle ferrying suspected militants, killing its three passengers.
Ansar al Sharia – Partisans of Islamic Law – seized several towns in Abyan last year, establishing a foothold there while then-President Ali Abdullah Saleh was grappling with mass protests that eventually toppled him.
The United States supported the Yemeni military campaign through which the army regained control of territory it had lost, but residents and analysts say that the militants are simply lying low and waiting for a chance to regroup.
"A number of individuals from these gangs took refuge in the mountains next to the north of Jaar after the big defeat they were dealt by the army and Popular Committees," said state news agency Saba.
"Today they resume their cowardly suicide operations".
Despite losing their territorial base, militants have shown they still pose a considerable threat, assassinating a top southern military commander, and killing four policemen in an attack on Jaar police station just last week.