Three other militants wounded in the same fight were also arrested.
Yemen has against al Qaeda extremists in the country. Yemen's foreign Minister Abu Bakr al Qirbi says Yemen needs millions of U.S. dollars in military aid, but he doesn't want any U.S. troops on the ground.
"This is again one of the issues that creates problems, definitely in Afghanistan," al Qirbi said. "We don't want to repeat the same mistake."
Al Qirbi claims there are as many as three hundred experienced al Qaeda fighters, any of whom could have influenced Umar Abdulmutallab.
U.S. and Yemen investigators are looking for links between Abdulmutallab and Anwar al Alawki. The American born cleric's popular online sermons preach violent jihad against the United States.
Special Report: The Christmas Day Terror Attack
Wendesday al Qirbi confirmed Yemen forces are tracking him closely.
"I think him, with other al Qaeda operatives are now under surveillance by security forces for sure," al Qirbi said.
For the United States, it is a familiar dilemma - how to root out al Qaeda without becoming, by their very presence, the jihadi's main recruiting tool.