The Houthis overran Ataq, the capital city of the Shabwa province, hours after a bombardment by coalition warplanes in the area, local sources said.
The fall of Ataq to the Houthis came without resistance from security forces who are believed loyal to Ansarullah.
The Houthis, who hail from the north, already control other parts of Shabwa province.
Saudi Arabia and fellow Sunni Arab countries launched in late March an air campaign targeting the Yemen to defend Hadi former president who flee the country.
Iran has sent two warships to the Gulf of Aden, saying they are only intended to protect Iranian commercial shipping from pirates.
Iranian President Hassan Rouhani called on Saudi Arabia to halt a two-week-old campaign of air strikes against Yemen and said countries in the region should work to bring Yemen's rival factions to the negotiating table.
Pakistani Army Chief General Raheel Sharif (R) talks with Iranian Foreign Minister Mohammad Javad Zarif during a meeting in Rawalpindi. Iran and Pakistan on April 8.
Iran's top diplomat Foreign Minister Mohammad Javad Zarif met with Pakistan's prime minister on Thursday in an effort to push for peace talks to resolve the crisis in Yemen, where a Saudi-led airstrikes' campaign supported by Islamabad.
Zarif and Pakistani Prime Minister Nawaz Sharif were to discuss the Yemeni conflict, state-run Pakistani media reported.
Meanwhile Saudi-led aggression in shadowy cooperation with Al Qaeda and fierce fighting in Aden continues.
Senior Yemeni commanders announced on Wednesday that the army and Ansarullah fighters are planning to arm the country's tribesmen against the Saudi-led aggression.
"The Yemeni army and Ansarullah plan to arm tribesmen in a bid to help the army and popular committees in their ongoing battle against the Saudi aggression," Yemeni Army Commander Major General Javad Al-Razi told FNA on Wednesday.
On the other hand Yemeni Attorney General has launched administrative proceedings against the country's former President Abd Rabbuh Mansur Hadi on suspicion of crimes against national security, local media reported Wednesday.
The Yemeni news outlets also said that a number of other senior officials, including former presidential advisors, could be involved in the process.
Former President Hadi has fled the country shortly after the Saudi Arabian-led coalition began launching airstrikes, targeting the Yemen, upon Hadi's request last month.
Pakistani Army Chief General Raheel Sharif (R) talks with Iranian Foreign Minister Mohammad Javad Zarif during a meeting in Rawalpindi. Iran and Pakistan on April 8.
In other part of country Suspected al-Qaida militants stormed a remote Yemeni border post with Saudi Arabia, killing at least two soldiers including the senior border guard officer, sources in Yemen's eastern Hadramawt province said.
They said the attackers took over the base near Manwakh, about 440 km (270 miles) northeast of the capital Sanaa.