Officials turned the offer down, sources told the Mareb Press.
The Yemen Post reported Sunday al-Qaida leaders in the southern province of Abyan, where the armed forces were pounding the terror group's positions, offered to release Saudi diplomat Abdullah al-Khalidi and Swiss woman Sylvia Abrahat in exchange for a truce.
Al-Khalidi was kidnapped by al-Qaida in Aden -- a southern seaport -- and Abrahat in the western province of Hodeida in March.
Mareb Press quoted military sources Sunday as saying the defense minister refused categorically to discuss any truce with the terrorists, warning of reprisals if the hostages were harmed in any way.
The Post said the army expected to be in control of all al-Qaida strongholds in Abyan within "days" of having cleansed the province.
Al Masdar reported online Sunday 33 people, including six soldiers, had died since Saturday.