Six suspected rebels were killed in the blast.
The defence ministry said the sinking of the navy craft was a violation of a truce arranged by Sri lanka's peace broker Norway and lodged a complaint with the Scandinavian ceasefire monitors.
"The suicide-style explosion carried out by the crew of the trawler causing damage to a naval vessel and claiming the lives of navy personnel is a violation of the ceasefire," the defence ministry said in a statement.
A search was under way for the bodies of the eight sailors missing in the incident off the coast of Mannar in the northwest of the island, officials here said, adding that 11 sailors had been rescued by local fishermen.
"The navy suspected that the trawler was involved in gun running and got near it to carry out a search," a defence official told AFP.
"As the FAC (Fast Attack Craft) got near, the six people aboard the trawler blew themselves up.
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The ministry said the magnitude of the blast suggested that the trawler was ca