The forces backing exiled President Abedrabbo Mansour Hadi have been aided by troops and materiel from Yemen's wealthy Gulf neighbours, as Saudi-led coalition warplanes pound rebel positions.
The rebels handed over Shabwa to government forces and withdrew after being promised a safe route out of the province, a military official told AFP.
Other sources confirmed the pull-out.
"The province was handed over" to the Southern Movement, a secessionist group whose militants have been fighting in loyalist ranks, said Salem al-Awlaqi, a political activist in Shabwa.
They also accused the rebels of booby-trapping government buildings before fleeing, as they had done in other provinces.
As the rebels began entering neighbouring Baida province, Saudi-led coalition warplanes hit their convoys, destroying 13 military vehicles and leaving dead and wounded, military officials said.
The sources could not immediately provide a casualty toll, and the rebels rarely acknowledge their losses.
Loyalist forces in the south launched an offensive last month against the rebels, forcing them out of main southern city Aden.
The advance is heading towards third city Taez, southwest of Sanaa, which analysts regard as the gateway to the capital which was overrun by the rebels in September.
After seizing Sanaa unopposed, the Huthis advanced on Aden in March, prompting intervention from the coalition aimed at restoring Hadi to power.
Renegade troops loyal to former president Ali Abdullah Saleh have joined the Huthis.
On the other side, the southern secessionists teamed up with pro-government troops as well as local Sunni tribes to form what they have dubbed Popular Resistance Committees.
Analysts say the sweeping victories in the south are a result of the rebels pulling their forces back to Taez, where residents reported ongoing clashes.
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