The rebel Liberation Tigers of Tamil Eelam (LTTE) pounded the port city of Trincomalee early in the day, killing two people, a local military official said, adding that many more had been wounded without giving a precise figure.
Troops fired back using multi-barrel rocket launches, but there were no immediate reports of rebel casualties.
The fighting in Trincomalee, 260 kilometres (160 miles) northeast of the capital Colombo, came as the Tigers accused the military of attacking across a de facto frontline in the Jaffna peninsula, 400 kilometres north of here.
"They are attacking our positions and are trying to move down to our areas," LTTE military spokesman Rasiah Ilanthiriyan told AFP.
"This is a ploy to attack civilians and we will defend them and hit back.
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There were no immediate reports of casualties in Jaffna.
The shelling followed an air attack against an LTTE base in the district of Batticaloa in the island's east on Friday.
Friday's bombing ended a brief