The Office of the United Nations High Commissioner for Refugees (UNHCR) said it had received 300 acres of land from the government to set up, by the end of the week, a camp for 42,000 people.
But it warned that it needs to double that capacity.
"UNHCR is urging the government to continue to make necessary preparations to receive and accommodate the large numbers expected in the coming weeks or months," spokesman William Spindler told journalists.
Government forces have pushed Liberation Tiger of Tamil Eelam (LTTE) rebels into a shrinking strip of land in northeast and have said they hope to completely crush the guerrillas by April.
But tens of thousands of civilians are trapped behind the front line, according to relief agencies.
"Given the magnitude of the civilian population still trapped inside in the LTTE territory, and expected to flee into government-controlled areas as military operations advance, UNHCR has requested the government of Sri Lanka to provide another 3