Sri Lanka's key foreign backers condemned the bombing and blamed the rebel Liberation Tigers of Tamil Eelam (LTTE), a group that was placed on the European Union's list of terrorist organisations late last month.
The island's main peace broker, Norway's International Development Minister Erik Solheim, described the attack as "horrific" and asked both sides to put an end to the spiral of violence and stop killing civilians.
"The most important now is for everyone in Sri Lanka to put a stop to this violence, where one act of violence creates a response from others and then it goes from one case of violence to another, worse and worse," Solheim said.
His remarks came after Sri Lanka hit back at suspected rebel positions across the island's northeast using supersonic jets, naval gunboats and artillery, military spokesman Prasad Samarasinghe said in the capital Colombo.
The United States said the Tigers must "renounce terror and enter into direct negotiations with the Sri Lankan government."