A Tiger rebel grabbed the gun of a soldier and opened fire as he tried to search a suspicious boat in the eastern district of Batticaloa on Saturday, the army said in a statement.
"An army soldier had spotted this suspicious boat with one man on board and tried to search it after talking to the boatman," the statement said, adding that the man was later identified as a Tiger regional leader.
Two other soldiers opened fire and overpowered the boatman who sustained injuries and was later admitted to hospital, the army said, adding that a search was under way in the area for remnants of the defeated rebel movement.
Military officials said Saturday's clash resulted in the first military loss of life since troops on May 18 announced the killing of the top leadership of the Liberation Tigers of Tamil Eelam (LTTE).
Security forces had killed over a dozen Tiger rebels in recent weeks in flushing out operations for remaining Tiger cadres.
The United Nations has estimated that between 80,00