A health official said the missile targeted a military parade in Aden, the temporary seat of the UN-recognised government, killing several commanders.
Among them, said security sources speaking to Reuters, was Brigadier General Muneer al-Yafee.
He had allegedly just stepped off the stage to greet a guest when the explosion happened.
Soldiers screamed and ran to lift the wounded on to trucks to take to hospital as witnesses described seeing red berets in pools of blood.
Houthi rebel spokesperson Brigadier General Yehia Sarea claimed they had carried out the attack.
He said the soldiers killed were loyal to the UAE, which is a member of the Saudi-led coalition fighting the Iran-backed Houthis since 2015.