Dozens of al Qaeda fighters have taken control of Ahwar, a strategic coastal city in Yemen that links two areas already seized by the militant group.
The airstrike hit wedding tents in which women and children had gathered separately from men. As many as 135 people were reportedly killed.
The Saudi-led coalition denied responsibility for the incident, which is believed to be the deadliest attack yet on civilians in Yemen's ongoing war.
After a rebel missile attack killed dozens of soldiers on Friday, the Saudi-led coalition retaliated by bombing multiple sites across Yemen.