At least three people have been killed in chaotic scenes in Yemen after bombs rained down on a city square where thousands of protesters had gathered in support of the country’s ousted president Ali Abdullah Saleh.

Fighter jets with the Saudi-led coalition bombed the country’s capital city of Sanaa yesterday, including the area around the Presidential palace, Associated Press reports.

Local officials reported at least three civilians were killed during the attack.

"Suddenly, they started bombing and the crowd started running,” Political analyst, Hisham al-Omeisy, who attended the rally, told the BBC .

“I basically bolted out of the area. People started screaming... Because everybody’s very well armed, they started shooting their AK-47s and their machine guns into the sky.” Pro-Saleh demonstrators were reportedly waving Yemeni flags, and chanting at the time of the attack.

Chairman Saleh al-Samad dictated plans for running the embattled country following the breakdown of UN-mediated peace talks between the rebels and the internationally backed government.

The rebel-controlled Saba news described the demonstration as "the most imposing in the history of Yemen".

The demonstration followed an incident where rockets fired by Yemeni rebels into a Saudi border city killed a Saudi civilian and wounded six others including a Pakistani man, the Saudi civil defence agency said.

The agency said five other wounded in the city of Najran were all Yemeni citizens, according to Al-Ekhbariya state television.

Cross-border attacks into Saudi Arabia have increased since a Saudi-led Arab coalition stepped up air strikes on insurgent targets inside Yemen in an attempt to shore up the beleaguered government. Yesterday’s attack was the third this week.

Doctors Without Borders (MSF) have withdrawn staff from six hospitals in Yemen after 19 people died in an air raid last Monday on a hospital it supported in the rebel-held northern province of Hajja.

US State Department spokeswoman Elizabeth Trudeau expressed deep concern after reports of the hospital strike.

A coalition team is conducting "independent" probes into the strike and an air raid which occurred two days earlier on a Koranic school that MSF said killed 10 children.