President Yoweri Museveni has vowed to step up military action against rebels in northern Uganda, after a seven-week truce expired without agreement.
Museveni was talking in Gulu near the ambush
The government says the Lord's Resistance Army (LRA) rejected a deal meant to pave the way for peace talks, and staged an ambush on the army.
Mediators said the LRA wanted more time to study the government's proposed memorandum of understanding.
Some 1.5 million Ugandans have been displaced during 18 years of fighting.
The Lord's Resistance Army, led by Joseph Kony, stands accused of abducting more than 20,000 children, making the boys fight and the girls work as sex slaves, and of mutilating and burning its civilian victims.
'Peace option remains'
On Friday, the LRA and the government failed to agree on the terms of a negotiated truce.
Then early on Saturday the army says it was ambushed by the LRA near the northern town of Gulu, and that one soldier was missing.
"Operations will not cease ever again until the Kony group irreversibly commit themselves to come out of the bush," Mr Museveni told crowds in Gulu.
"It is the rebels who refused to sign the cease-fire memorandum of understanding and this is the reason why the government has taken the decision to start fighting them while the peace option remains," the president said, adding that negotiations would continue.
There has so far been no word from the rebels.
A limited ceasefire had been declared in November to allow the rebels to meet to discuss prospects for peace.
Interior Minister Ruhakana Rugunda said the government remained ready to sign a deal at any time.
He had earlier described how rebel and government negotiators had embraced during the first direct talks between the two sides for a decade.
Mediators have said that there are still contacts between representatives of both sides, despite the clash.
The United Nations, Britain,
Netherlands and Norway have been sponsoring the talks.