Hundreds of thousands of Yemenis on Saturday rallied in the capital Sana'a in a show of support to a council set up by rebels to rule the war-wracked country.

Demonstrators, waving the national flag, packed the Sabeen Square and nearby streets in central Sana’a.

They chanted slogans backing the 10-member council that the rebel Houthis and allies loyal to former Yemeni president Ali Abdullah Saleh unveiled last month.

The demonstrators also condemned a bombing campaign that a Saudi-led coalition has been carrying out against rebels in Yemen in support of internationally recognized President Abd Rabu Mansour Hadi.

The gathering is believed to be the biggest to have been held in rebel-held Sana’a since a civil war started in Yemen nearly two years ago.

The head of the nascent ruling council, Saleh al-Samad, told the rally that it would decide on a new government in the "next few days" - a move that would dim prospects for peace talks between the rebels and Hadi's administration.

“A new government will be announced in the next few days to unify all efforts to reach a stable situation if possible and set the scene for general elections,” he said without giving details.

Earlier this month, UN-sponsored negotiations between representatives from Hadi's government and rebels ended in Kuwait without a breakthrough.

The Saudi-led coalition has since stepped up airstrikes in rebel-held areas in Yemen.

Three civilians were killed and others injured later on Saturday when coalition jets bombed a presidential palace in Sana’a, the rebel-controlled Yemeni news agency reported.

The attack occurred as people were returning from the rally, the agency added, citing an unnamed security official.

The alliance aircraft also bombed rebels’ military facilities in the eastern and northern parts of Sana’a, locals said without giving casualty figures.

There was no comment from the Riyadh-based coalition.

Saturday's rally in Sana'a comes a week after Yemeni parliament met for the first time since the start of the civil war in the country nearly two years ago.

The legislature approved the rebel ruling council despite a warning from Hadi, whose government is in exile in Saudi Arabia.

Sana'a has been under the Houthis' control since September 2014.

The Yemen conflict has intensified since March 2015 when the mostly Shiite rebels advanced on the southern city of Aden, prompting Saudi Arabia and fellow Sunni allies to start an air campaign in Yemen against the group. 

Rebels have since carried out a series of retaliatory attacks on Saudi border areas.

A Saudi citizen was killed and six foreign expatriates on Saturday when a shell fired from the Yemeni territory landed in Najran in south-western Saudi Arabia, the Saudi civil defence service said.

Five of the injured people were Yemeni nationals and the sixth a Pakistani man, it added.

The Saudis fear that Yemen's rebels will give their regional rival, Shiite Iran, a strategic foothold on the Arabian Peninsula.

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