One attacker drove a car packed with explosives into the gate of the ministry's compound, then gunmen in another vehicle sped in and opened fire on soldiers and doctors and nurses working at a hospital inside, witnesses told Reuters.
The coordinated strikes wounded 167 people, said the Yemeni government's security committee. Two German and two Vietnamese doctors, and one Indian and two Filipino nurses were among the dead, it added.
No one immediately claimed responsibility, but a Yemeni expert on Islamist militant affairs said it bore the hallmarks of al Qaeda.
Yemen has been grappling with al Qaeda-linked militants who have repeatedly attacked government officials and installations over the past two years.
The security threat is an international concern. The U.S.-allied country shares a long border with Saudi Arabia, the world's top oil exporter, and the branch of al Qaeda that is based there has plotted attacks against Western targets.
Ministry staff were arriving for work when the suicide bomber struck, two sources inside the ministry said.
The massive blast shook the bustling Bab al-Yemen neighbourhood on the edge of the capital Sanaa's old city, a warren of market stalls and stone tower houses decorated with stained glass windows and ornate plasterwork.
"The explosion was very violent, the whole place shook because of it," said an employee who works in the area where the country's central bank is also located.
Medics and a defence ministry official said the gunmen pulled a Western doctor and a Filipino nurse into the hospital's courtyard and shot them in front of local staff.
The attackers also killed one of Yemeni President Abd-Rabbu Mansour Hadi's relatives who was visiting a patient in the site, the defence ministry said on its website.
Security forces retook the compound after killing most of the attackers, the ministry added.
"FINGERPRINTS OF AL QAEDA"
The United Nations and German Foreign Minister Guido Westerwelle condemned the attack.
Yemeni analyst Abdelrazzaq al-Jamal, who specialises in Islamist militant affairs, drew parallels with an attack claimed by al Qaeda on a military base in eastern Yemen in September.
"The operation carries the fingerprints of al Qaeda because of the suicide nature of the attack," al-Jamal told Reuters.
Violence is common in Yemen, where an interim government is fighting southern secessionists and northern Houthi rebels in addition to the al Qaeda-linked militants, who are seeking to overthrow the government and impose their version of Islamic law.
The country is also facing severe economic problems inherited from former president Ali Abdullah Saleh who was forced out of office by a popular uprising in 2011.
Islamist insurgents took advantage of the chaos triggered by Saleh's overthrow to seize several southern cities, but were driven out in 2012 in a government offensive aided by U.S. drone strikes.
Al Qaeda militants have since killed hundreds of Yemeni soldiers and members of the security forces in a series of attacks, particularly in the southern provinces of the country.
In July last year, a suicide bomber wearing a Yemeni army uniform killed more than 90 people rehearsing for a military parade in the capital. Al Qaeda later claimed responsibility.
