"A series of street battles struck the residential neighbourhoods of Crater district in Aden as security forces attempted to raid hideouts of an armed group in the city," a official told Xinhua news agency on Saturday.
"The well-armed unidentified gunmen topped the residential buildings and engaged in ferocious fightings with the security forces by using heavy weapons," he said.
He added that the gunmen destroyed a number of armoured vehicles with rocket-propelled grenades.
Five people were killed and several others injured during the confrontations that lasted for more than 12 hours, according to the official.
Meanwhile, a statement released by Aden's local government called on the people "to stay in their residential houses and avoid to get out during the upcoming hours".
It declared the launch of "a security operation to eliminate the outlawed elements and terror groups" in the city.
The local government confirmed that "there is an attempt to drag the city into chaos and insecurity", vowing to protect citizens and the state institutions in Aden.
Local authorities are trying to maintain security and stability in the strategic Yemeni port city, which considered as the country's temporary capital.
However, sporadic bombing incidents and drive-by shooting attacks still occur in Aden.
Yemen has been mired in a civil war since late 2014, when the Iran-backed Houthi rebels seized control of several northern provinces and forced the internationally-recognized government of Hadi out of the capital Sanaa.