Heavy fighting that started on Friday had cut off the northern Jaffna peninsula, a military official said, where hundreds of residents were fleeing the violence.
Tamil separatists, whose rebellion has claimed more than 60,000 lives in the past three decades, denied government comments they were ready to renew stalled peace talks after the deadliest clashes since a 2002 truce.
"I only explained to the SLMM (Sri Lanka Monitoring Mission) head that the Sri Lankan government is not interested in peace after several goodwill gestures made by us," said S. Puleedevan, head of the Liberation Tigers of Tamil Eelam's (LTTE) Peace Secretariat.
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"To say that I have offered talks is a total fabrication," he told AFP by satellite telephone.
Policy Planning Minister Keheliya Rambukwella earlier said the rebels had made an overture through the truce monitors to revive talks and Colombo was ready for discussions.
"We have told them, name your team and find a date and we will be there," Rambukwella