SANAA (Reuters) - Fighting between Shi'ite rebels and Sunni Islamists wounded at least 26 people in north Yemen Wednesday, as the new prime minister worked to form a government under a Gulf plan to avert civil war by easing President Ali Abdullah Saleh from power. The plan crafted by Yemen's wealthier neighbors envisions a government including opposition parties that backed 10 months of protests aimed at ending Saleh's 33-year rule, which would lead the country to presidential elections in February. Saleh, who backed out of that deal three times, signed it last week and transferred powers to his deputy, a step the plan's sponsors said will help reverse the chaos Yemen has slid toward during the political struggle over Saleh's fate. One of the country's multiple, overlapping regional conflicts flared anew when Shi'ite Muslim fighters who have rebelled in a northern province along the Saudi border attacked Sunni Islamists whom they have fought over the last week. A group of Yemeni Salafis -- Sunnis who hold a puritanical creed with followers in Saudi Arabia -- said fighters from the rebel Shi'ite Houthi movement attacked early Wednesday in Damaj, 150 km (90 miles) north of the capital Sanaa. The official, Abu Ismail, spoke by telephone with explosions audible in the background, and said several students of the town's Dar al-Hadith religious school had been injured in shelling. His group said at least 25 people were killed in Houthi shelling in the region Saturday and Sunday. The Houthis, members of the Zaidi branch of Shi'ism who draw their name from a tribal leader, effectively control the northern Saada province and are deeply wary of Saudi Arabia's promotion of Salafi creeds that class Shi'ites as heretics. They have accused the Salafis in the northern Saada province of working to build military encampments near the Saudi border. Saleh's forces struggled to crush the Houthi rebellion -- which Saudi forces also intervened against militarily -- before a cease-fire last year. The fighting came as Yemen's prime minister designate, Mohammed Basindwa, a former foreign minister who joined the opposition to Saleh, worked to form a transitional government that he has said will be set in days. Opposition politicians, who are to split seats in the government with members of Saleh's ruling party, said negotiations were underway on the formation of a security committee tasked in part with separating the forces of Saleh's partisans and foes who have clashed in the capital. In the south, where the United States -- which long backed Saleh in its campaign against al Qaeda -- and Saudi Arabia fear the Yemeni wing of the Islamist group could find a foothold, an older political conflict also overshadows the Gulf plan. Members of a secessionist movement who want to undo the territorial union that Saleh presided over in 1990 marched through the southern port of Aden Wednesday.