The resident says the blasts can be heard as far as 10 miles (15 kilometers) from the factory in southern Abyan. It's unclear if the explosions are accidental or intentional.
The factory in Khanfar area close to Jaar city makes munition and Kalashnikov rifles.
Resident Seif Mohammed says several ambulances have been bringing the injured to al-Razi hospital in Jaar on Monday.
The factory was seized on Sunday by a Salafi Jihad militant group, one of many roaming mostly lawless Yemen. The group is not an al-Qaida offshoot.
Yemen has been rocked by weeks of political turmoil and deteriorating security.