The deadly blast in Aden, which is under the control of the internationally recognised government in exile in Saudi Arabia, targeted troops waiting to collect their pay, it has been reported.
Islamic State militants have repeatedly claimed responsibility for carrying out attacks on military personnel in the southern port city.
The militants have taken advantage of Yemen's brutal civil war between the government and the Iran-aligned Houthi rebels.
Saudi Arabia intervened in the conflict in March, 2015, to battle the government's enemies.
However, it has failed to oust the rebels from the capital Sanaa despite thousands of airstrikes that have resulted in the deaths of hundreds of civilians as the population struggles with starvation and disease.
Britain has lent military assistance, helping the Saudis select targets, but the Ministry of Defence insists it is to ensure the country complies with the rules of war.
The UK is also a massive exporter of arms to the country.
